Could an advertising agency act as its client's agent when its own art department prepared reproduction art?

Plain-English summary

The memorandum drew two lines. First, it treated advertising agencies as consumers of art used to perform contracts for producing and placing advertising in advertising media.

Second, it treated an agency as the seller of reproduction art its own art department prepared for pamphlets, booklets, and similar material, even if the broader contract created a true agency under historical Sales and Use Tax Ruling 2.

Civil Code section 2295 defined an agent as representing a principal in dealings with third persons. Because the agency's own creation of art for its client did not involve a third person, the source concluded it could not act as agent for that activity.

Citations and references

• California Civil Code § 2295
• Historical California Sales and Use Tax Ruling 2

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 100.0300
• Original supporting opinion: 100.0300 PDF

Original ruling text

State of California

Board of Equalization

Memorandum

To:

San Diego - Administrator

From:

Sales Tax Counsel (JHM)

Subject:

The T--- Company
XXXX --- Boulevard
--- --- X, California

100.0300
Sacramento
March 11, 1958

Account - - XXXXX

For your information we have been considering for some time the question of the application of tax to reproduction art prepared by an advertising agency. We have come to the following conclusions: 1. Advertising agencies are the consumers of art work used in performing contracts for the production and placing of advertising in advertising media. (Mr. W. R. T--- is not in agreement with this conclusion and has had considerable correspondence with Mr. Stetson seeking to have Mr. Stetson modify his views to conform to those expressed in the Lipscomb and Hahn booklet.) 2. An advertising agency is the seller of reporduction art work prepared by its own art department for the preparation of pamphlets, booklets, etc., even though the contract creates a “true agency” under Ruling 2. The reason for this is that Section 2295 of the Civil Code provides: “”An agent is one who represents another, called the principal, in dealings with third persons.” An advertising agency in the preparation of art work for its client is not dealing with third persons and, accordingly, cannot act as an agent with respect to that activity. If you have any questions concerning this matter, we will endeavor to answer them for you at your request. John H. Murray

JHM:re