In preparing returns, grocers may use any method of determining the amount of their sales of exempt food products which does not result in an overstatement of the exemption. Grocers must be prepared to demonstrate by records which can be verified by audit that the method used properly reflects their sales of exempt food products.
If the grocer elects to use the purchase-ratio method of reporting, the following criteria should be followed:
When the purchase-ratio method is used for reporting purposes and sales of nongrocery taxable items are computed by the retail extension or markup method, the computation of nongrocery taxable sales should include adjustments for beginning and ending inventories of these items and may include adjustments for shrinkage as specified in (d) below.
The term does not include display or other merchandising plan allowances or payments which are based on agreements to provide shelf space for a price not related to volume of purchases, or cooperative advertising allowances which are based on a national line rate for advertising and are not directly related to volume of purchases and sales. Cooperative advertising allowances are intended to reimburse grocers for a portion of their advertising costs for a particular product or products.
..........................
$40,000
..........................
[FN*]
x Item 1)
3,300
..........................
43,300
..........................
130,000
..........................
173,300
..........................
75.01%
..........................
254,088
..........................
[FN*]
sales tax to total)
[FN**]
31,500
..........................
222,588
..........................
166,963
..........................
87,125
..........................
2,000
..........................
85,125
..........................
[FN*]
x Item 13)
6,488
..........................
78,637
..........................
[FN*]
x Item 15)
6,488
In order to ensure that markup factor percentages typical of the total business are determined, grocers who conduct multistore operations should include purchases from several representative stores in the shelf test sample of markup factor percentages.
The overall average markup factor percentage should be determined as follows:
Losses in excess of the above are allowable when supported by records which show that a greater loss is sustained.
Use applicable tax rate--tax rate of 8.25% used for illustration purposes.[FN**]
Adjust for shrinkage if applicable--see paragraph (d).[FN1]
Markup factor percentage is the markup + 100%. When applied to cost, it computes the selling price. For example, an item costing $1.00 and selling at a 25% markup will have a markup factor of 125%. The markup factor (125%) when applied to $1.00 cost results in a $1.25 selling price.
Cal. Code Regs. Tit. 18, § 1602.5
2. Amendment filed 10-18-88; operative 11-17-88 (Register 88, No. 43).
3. Amendment of subsection (c) and NOTE filed 9-21-93; operative 10-21-93 (Register 93, No. 39).
4. Amendment filed 6-19-95; operative 7-19-95 (Register 95, No. 25).
5. Amendment of subsections (b)(1)(G) and (b)(2), repealer of subsection (b)(3)(B)2.G. and amendment of subsection (b)(4) filed 12-1-2008; operative 12-31-2008 (Register 2008, No. 49).
6. Change without regulatory effect amending subsections (b)(1)(G)2.-3., (b)(1)(G)5.-6., (b)(1)(G)8., (b)(1)(G)10.-11. and (b)(1)(G)13.-16. and related footnote filed 5-13-2010 pursuant to section 100, title 1, California Code of Regulations (Register 2010, No. 20).
7. Amendment of subsections (b)(1)(F)1.-2., (b)(1)(G)12., (b)(3)(B)2.a., (c) and (f) and amendment of NOTE filed 9-7-2021; operative 9-7-2021. Pursuant to Government Code section 15570.40(b), this action is exempt from the Administrative Procedure Act. Submitted to OAL for filing and printing only pursuant to Government Code section 11343.8 (Register 2021, No. 37).
Note: Authority cited: Sections 7051 and 7051.5, Revenue and Taxation Code; and Sections 15570.22 and 15570.24, Government Code. Reference: Sections 6359 and 6373, Revenue and Taxation Code.
2. Amendment filed 10-18-88; operative 11-17-88 (Register 88, No. 43).
3. Amendment of subsection (c) and Note filed 9-21-93; operative 10-21-93 (Register 93, No. 39).
4. Amendment filed 6-19-95; operative 7-19-95 (Register 95, No. 25).
5. Amendment of subsections (b)(1)(G) and (b)(2), repealer of subsection (b)(3)(B)2.G. and amendment of subsection (b)(4) filed 12-1-2008; operative 12-31-2008 (Register 2008, No. 49).
6. Change without regulatory effect amending subsections (b)(1)(G)2.-3., (b)(1)(G)5.-6., (b)(1)(G)8., (b)(1)(G)10.-11. and (b)(1)(G)13.-16. and related footnote filed 5-13-2010 pursuant to section 100, title 1, California Code of Regulations (Register 2010, No. 20).
7. Amendment of subsections (b)(1)(F)1.-2., (b)(1)(G)12., (b)(3)(B)2.a., (c) and (f) and amendment of Note filed 9-7-2021; operative 9/7/2021. Pursuant to Government Code section 15570.40(b), this action is exempt from the Administrative Procedure Act. Submitted to OAL for filing and printing only pursuant to Government Code section 11343.8 (Register 2021, No. 37).