Laws, Regulations and Annotations
Business Taxes Law Guide – Revision 2022
Sales And Use Tax Law
Revenue and Taxation Code
Division 2. Other Taxes
Part 1. Sales and Use Taxes
Chapter 4. Exemptions
Article 1. General Exemptions
6353. Gas, electricity, and water. There are exempted from the taxes imposed by this part the gross receipts derived from the sales, furnishing, or service of and the storage, use, or other consumption in this state of, of all of the following:
(a) Gas, electricity, and water, including steam and geothermal steam, brines, and heat, when delivered to consumers through mains, lines, or pipes.
(b) (1) Liquefied petroleum gas, delivered to a qualified residence by the seller, that is sold for household use in the qualified residence, or liquefied petroleum gas that is purchased for use by a qualified person to be used in producing and harvesting agricultural products; provided, in either case, the liquefied petroleum gas is delivered into a tank with a storage capacity for liquefied petroleum gas that is equal to or greater than 30 gallons. This subdivision may not be construed to provide any exemption from any tax levied by a city, county, or city and county pursuant to Section 7284.3, or any successor to that section.
(2) For purposes of this subdivision:
(A) "Qualified residence" means a primary residence, not serviced by gas mains and pipes.
(B) "Qualified person" means any person engaged in a line of business described in Codes 0111 to 0291, inclusive, of the Standard Industrial Classification Manual published by the United States Office of Management and Budget, 1987 Edition, and any other person that assists that person in the lines of business described in this paragraph in producing and harvesting agricultural products.
(c) Water when sold to an individual in bulk quantities of 50 gallons or more, for general household use in his or her residence if the residence is located in an area not serviced by mains, lines or pipes.
(d) Exhaust steam, waste steam, heat, or resultant energy, produced in connection with cogeneraton technology, as defined in Section 25134 of the Public Resources Code.
(e) The exemptions provided by subdivision (b) shall be effective starting September 1, 2001.
History—Stats. 1972, Ch. 402, in effect October 1, 1972, added the household water exemption. Stats. 1978, Ch. 1010, effective January 1, 1979, added "and of exhaust steam, waste steam, heat, or resultant energy, produced in connection with cogeneration technology, as defined in Section 25134 of the Public Resources Code." to the last sentence. Stats. 1986, Ch. 420, in effect July 17, 1986, added reference to "steam and geothermal steam, brines, and heat". Stats. 2001, Ch. 156 (AB 426), in effect August 7, 2001, operative September 1, 2001, added "derived" after "gross receipts", added ", all of the following:" after "in this state of", in the first paragraph added subdivision letter designation (a) after "in this state of", substituted "Gas" for "gas" after "(a)" therein, added subdivision (b), added subdivision letter designation (c) after "or pipes, and" and substituted "Water" for "water" after "(c)" therein, added a comma after "gallons or more", added subdivision letter designation (d) after "or pipes, and of" therein, and substituted "Exhaust" for "exhaust" after "or pipes and of" therein, and added subdivision (e). Stats. 2011, Ch. 727 (AB 242), in effect January 1, 2012, deleted ", unless the State Board of Equalization determines that implementation by that date is not feasible, in which case the board shall, on or before that date, report to the Legislature regarding the reasons why it must delay implementation, and shall thereafter implement these exemptions no later than October 1, 2001" after "September 1, 2001" in subdivision (e).
Note.—Stats. 1986, Ch. 420 expressed the intent of the Legislature that the provisions of this act codify the longstanding administrative practice of the State Board of Equalization which interprets Section 6353 of the Revenue and
Taxation Code as exempting steam from sales and use taxation. Therefore, it is the intent of the Legislature that these provisions do not constitute a change in, but are declaratory of, the existing law.
Delivery of Liquefied Petroleum Gas by Hose from Vendor's Tank Truck to Buyer's Storage Tank is not Exempt. Delivery of Gas through Mains, Lines, or Pipes.—Plaintiff Standard Oil Company of California brought suit for refund of use tax which it had paid on liquefied petroleum gas (LPG) which it had used. The claim for refund was based on Revenue and Taxation Code Section 6353 which exempts from tax the use of "gas, electricity, and water when delivered to consumers through mains, lines, or pipes." The Board has long construed this section as not including within its exemption from taxation, sales or use of substances emptied from vendor's vehicles by means of hoses.
The LPG was transported by the vendor's tank truck to plaintiff's storage facility and delivered by passing it from the truck to plaintiff's container through the vendor's flexible high pressure tube or hose. Plaintiff claimed that LPG was a gas, even though delivered in liquid form, and that the delivery from the truck to the storage tank was through a main, line, or pipe. The trial court upheld plaintiff's contention.
The District Court of Appeal reversed the judgment and upheld the Board's construction of the statute. The court first observed that the Board's construction was entitled to great weight and was not to be overturned unless clearly erroneous or unauthorized. Using dictionary definitions the court found that mains, lines, and pipes did not necessarily include hoses and that a later amendment of the statute indicated that the Legislature, in its use of the words "mains, lines, or pipes," meant fixed "mains, lines, or pipes" as ordinarily service a geographical area with utility service. Further noting that statutes granting exemptions from taxation must be reasonably, but strictly, construed against the taxpayer, the court found that the Board's construction was neither clearly erroneous nor unauthorized.
The court distinguished a 1943 opinion of the Attorney General which exempted sales of gas through installations placed by a public utility on the premises of gas consumers. In that situation as many as 24 customers were connected with each installation by means of pipes owned by the customers, the tanks and their contents were owned by the utility, there was continuous "delivery" through the "pipes" from the tank, and the flow to the customer was through the utility's meter into the customer's pipe and gas consumption devices.
Since the court held that plaintiff's use of LPG, following its delivery under the circumstances of the appeal, was not exempted from taxation, it was unnecessary to determine whether the LPG, a liquid throughout its delivery by tank truck and hose, was a "gas" within the meaning of Secton 6353. Standard Oil Company of California v. State Board of Equalization (1974) 39 Cal.App.3d 765.
Geothermal steam exemption retroactive.—The 1986 legislation which expressly exempted geothermal steam was intended to have retroactive effect. The retroactive exemption was not a constitutionally prohibited gift of public funds since it served an important public purpose of promoting alternative energy. County of Sonoma v. State Board of Equalization (1987) 195 Cal.App.3d 982.