Tax Guide for Distillers and Distributors of Distilled Spirits
Ingredients

Distilled Spirits Ingredients

This section provides guidance on the application of sales and use tax to ingredients and products used in distilling spirits. Sales of ingredients and products to distilleries may or may not be taxable, depending on whether they fall into one of the following categories:

  • Food products – Sales of food products intended for human consumption are not taxable. Therefore, ingredients used in producing distilled spirits that are considered food products (such as grains, potatoes, and yeast) are not taxable.
  • Raw materials – Tax does not apply to sales made to distilleries of non-food products or ingredients intended for incorporaton into the finished product (distilled spirits).
  • Manufacturing aids – Tax does apply to sales of non-food products or ingredients purchased for use in manufacturing or producing distilled spirits but not for physical incorporation into the finished product.

Food Products Are Not Subject to Tax

Sales of food products are not taxable when used to produce distilled spirits.

Examples of food products that may be used to produce distilled spirits:

  • Grains of any kind
  • Vegetables (like, sugar cane, sugar beet, and potato)
  • Glucose
  • Maple syrup
  • Caramel syrup
  • Sugar cane (like, cane juice and molasses)
  • Cherry stones
  • Juniper berries
  • Fruit (like, grapes, apples, pears, plums, dates, strawberries, and raspberries)
  • Fruit juice
  • Fruit concentrate
  • Roots (like agave and ti-root)
  • Herbs
  • Spices
  • Nuts
  • Yeast and yeast products
  • Enzymes (amylases)

Raw Materials or Ingredients Incorporated into Distilled Spirits May Be Purchased for Resale

Distilleries may purchase raw materials for resale without paying tax when they will become ingredients or component parts of the finished product that will be resold. Examples, include artificial flavors (such as vanillin and maltol) and color additives.

If you make distilled spirits for personal consumption and do not intend to resell them tax is due on the sale of the ingredients to you. These ingredients may only be sold without tax when they are intended to be incorporated into spirits that you will later resell.

Purchases of Manufacturing or Processing Aids Are Subject to Tax

Tax applies to sales of products that are consumed in manufacturing distilled spirits but not physically incorporated into the finished product. If property is purchased primarily as an aid in manufacturing process, its sale is taxable, even though some portion may remain in the finished product.

Examples of manufacturing aids used to produce distilled spirits include:

  • Products that stabilize color before fermentation.
  • Chemicals that assist yeast during fermentation.
  • Products that cause a chemical reaction during or after fermentation.

Filing a Claim for Refund

If you believe you have paid tax in error on purchases of ingredients or products used to produce distilled spirits, you may be entitled to a refund of the overpaid tax.

You may generally claim a refund at any time within the statute of limitations (generally three years). If you are seeking a refund for overpaid taxes on qualifying purchases of manufacturing or research and development equipment, the procedures differ depending on whether the original purchase was subject to sales tax or whether the original purchase was subject to use tax. The California Use Tax webpage provides more detailed information about use tax.

If the tax you overpaid was sales tax, you must request a refund from the retailer. The retailer may then file a claim for refund with us. As the purchaser, you will need to provide the retailer with a completed resale certificate (CDTFA-230, General Resale Certificate, or similar form) and documented evidence that the original purchase should have qualified as raw material intended to be incorporated into the finished product. However, if the item on which you paid sales tax is a food product a resale certificate is not necessary.

If the tax you paid was use tax (typically use tax applies when you purchase from an out-of-state vendor), you may file a claim for refund directly with us. Simply complete CDTFA-101, Claim for Refund or Credit, and mail it to the address provided on the form. Under Basis for refund, state that the property purchased qualifies as a food product or raw material intended to be incorporated into a finished product.

If you paid sales or use tax on a manufacturing aid or other taxable property and subsequently resold it before using it, you may deduct the purchase price of the property on your sales and use tax return. You must take the deduction under the heading Tax-paid purchases resold on your return in the same period in which you included the property's sale.

For more information on claims for refund, see publication 117, Filing a Claim for Refund.