Did a public-relations firm need a seller's permit when it wrote and distributed news releases and supplied brochure copy but did not sell artwork or printing?
Apply this to your situation
This page answers the general question as of 1988. Ask about yours and see what current California tax law says, with citations.
Plain-English summary
A Massachusetts public-relations firm opened a California branch. It provided communications consulting, developed strategies, plans, and budgets, wrote and distributed news releases, and sometimes wrote words for client brochures. It said it did not perform advertising work, artwork, or brochure printing.
Tax counsel agreed that the firm did not need a seller's permit for those described activities. Writing and distributing news releases for clients was a service, not a sale. Writing brochure copy was also nontaxable so long as the firm was not the seller of the brochure.
The photography treatment was different. When the firm hired a photographer and used the photographs in preparing news releases without reselling them to clients, tax applied to the photographer's sale to the firm.
What this means for you
Public-relations firms
Standalone communications advice, news-release work, and copywriting can be services when the firm does not sell the resulting printed property.
Copywriters
Document whether you only supply words or also sell the brochure, artwork, printing, or another tangible deliverable.
Accountants and tax professionals
A service provider can still be the taxable consumer of photographs or other property it buys and uses in performing the service.
Common questions
Q: Did writing and distributing hard-copy news releases require a seller's permit?
A: Not on the facts described. The letter characterized that work as a service.
Q: Was brochure copy taxable?
A: No, assuming the firm was not the seller of the brochure.
Q: Did the conclusion cover artwork or printing?
A: No. The firm specifically said it did not provide those items.
Q: Were photographs used in news releases tax-free?
A: No. If the firm bought and used them without resale, the photographer's sale to the firm was taxable.
Citations and references
- California Revenue and Taxation Code §§ 6014 and 6066
- California Sales and Use Tax Regulation 1540(b)(4)(E)
Source
- Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
- Annotation page: Annotation 100.0034
- Original supporting opinion: 100.0034 PDF
Original ruling text
100.0034
STATE OF CALIFORNIA
STATE BOARD OF EQUALIZATION
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001
TELEPHONE (916) 445-6493
August 19, 1988
Mr. S--- B. H---, Jr.
President
S--- H---, Inc.
XXX --- -----, Massachusetts XXXXX
S--- H---, Inc. (no permit number)
News releases and copy writing
Dear Mr. H---:
In your July 11, 1988 letter to the Board’s legal staff, you write that when you applied for a seller’s permit for your company’s new branch office at the Board’s San Jose office, Ms. Cynthia E. Guest, Senior Tax Representative, indicated she felt you did not need a permit for your activities, but she suggested you write us for a legal opinion on this matter. You write: “We are a [city], Massachusetts-based public relations firm specializing in high technology. Our California branch office opened June 1, 1988 and is based in
[city 2]. Our primary business is providing consultative advice. We develop communication strategies, write plans and budgets for our clients, and offer them our suggestions. From time to time, we write news releases, and will send these news releases over news wire services or in hard copy form to trade and business publications. We do not do any form of advertising work for our clients, nor do we perform artwork and printing for brochures. From time to time, however, we will write the words for a brochure. We will also from time to tome hire a photographer to take snapshots of a client in case we need a photograph for a news release.” Opinion We agree with Ms. Guest that you do not need a seller’s permit to engage in the type of activities you described in your letter. A seller’s permit is required of any person who engages in the business of selling or leasing tangible personal property of a kind which is subject to sales or use tax. (Revenue and Taxation Code Sections 6014, 6066). However, persons who provide
Mr. S--- B. H---, Jr.
-2-
August 19, 1988
100.0034
nontaxable services (i.e., services which are not a part of the sale or lease of tangible personal property) are not required to hold seller’s permits. The writing and distribution of news releases on behalf of your clients is a service, not a sale. Likewise, your writing words for inclusion in a brochure is a nontaxable service, assuming that you are not the seller of the brochure. (Regulation 1540(b)(4)(E)). With respect to the photographs, tax applies to the photographer’s sale to you of the photographs which you use in preparing news releases for your clients, assuming you do not resell the photographs to your clients. I enclose a copy of Regulation 1540 for your information. Please feel free to contact me if you have any further questions or comments about this letter. Sincerely,
John Abbott
Tax Counsel
JA:jb
Enclosure
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