California tomato suppliers will need to change their accounting method after the Ninth Circuit determined an IRS audit requirement was necessary.

The US Circuit Court for the Ninth Circuit on Dec. 19 ruled 2-1 against Morning Star Packing Co. and Liberty Packing Co., two California-based companies that supply 40% of the US's tomato paste and diced tomatoes. The related entities sued after the IRS sought to compel a change to their accounting method, starting on their 2008 tax returns.

Morning Star and Liberty Packing account for the sales from a 100-day tomato harvest, as well as the $16 to $21 ...