Westinghouse Beverage Group, Inc. v. County of San Diego

Opinion

WORK, J. In this case we hold a manufacturer and wholesaler of soft drink products, Westinghouse Beverage Group, Inc., doing business as Seven-Up Bottling Companies of Southern California (7-Up), may be assessed San Diego County property taxes on its reusable containers in the possession of its wholesale customers on the lien date, in which it supplies carbon dioxide (Oa) gas and those in which it transports the syrup which, when mixed with the CO2, becomes a carbonated beverage which in [1444]turn is retailed by 7-Up’s customers. For the following reasons, we conclude 7-Up’s stainless steel returnable containers are neither exempt from property tax by virtue of the business inventory exemption stated in Revenue and Taxation Code sections 129 and 2191 nor as returnable “containers used to package soft drink beverages” which are assessable only to the person in possession on the taxable lien date pursuant to section 996, subdivisions (a) and (c).

Relevant Facts

7-Up sued the County of San Diego for return of property taxes assessed on containers of CO 2 and containers of syrup which were in the possession of its wholesale customers on the lien date. These containers are not sold to the wholesaler. The syrup container is valued at $20 to $25 and the CO2 container at $60. 7-Up receives no deposit for the syrup canister and only a $25 deposit on its CO2 containers. For accounting purposes, 7-Up does not treat the exchange of the containers as a sale. 7-Up does not include the $25 deposit received for the CO2 container in its sales account; it is not seen as a profit item; rather the $25 is marked in the liability account when it is received and marked in the cash account when it is paid out for returned containers. 7-Up does not distinguish between containers that are at the retailers versus ones at its facilities, but designates them all as depreciating assets. The sales invoice to the retailer lists the charges for the syrup and the CO2 separately from the deposit for the CO2 container. If the retailer orders the same number of refilled CO2 containers as empty ones he is returning, no cash is exchanged for the CO2 containers.

Further, 7-Up collects no sales tax from its customer for the containers. Although the items 7-Up’s customer purchases for resale are at wholesale and do not involve sales taxes, these containers are not intended to be resold and, in the absence of any indicia of a title transfer from 7-Up to its customer, remain the property of 7-Up while in the possession of its customer.