Could a newspaper publisher buy strapping for resale when carriers removed it before delivering newspapers to subscribers?

Plain-English summary

The publisher sent strapped newspaper bundles directly to independent newspaper carriers, who delivered the individual papers to subscribers. Section 6015(c) made the publisher—not the carrier—the retailer of the newspapers.

Because subscribers did not receive the strapping with the newspapers, the publisher consumed the strapping in distribution and owed tax on its purchase. The memorandum distinguished rubber bands delivered to subscribers with newspapers, which could qualify as nonreturnable containers.

Common questions

Did delivering strapping to newspaper carriers count as resale to subscribers?

No.

Citations and references

• Cal. Rev. & Tax. Code § 6015(c) — publisher treated as retailer in the carrier-publisher relationship
• Cal. Rev. & Tax. Code § 6364 and Regulation 1589 — container resale rule applied to strapping
• Annotation 195.0960 (March 4, 1960) — rubber bands delivered with newspapers distinguished
• Brad Bresnahan's memorandum to Assistant Chief Counsel Gary Jugum — strapping resale-versus-consumption question summarized; date and separate memorandum not supplied in the official PDF
• January 3, 1994 Board-staff telephone conversation — publisher-carrier relationship and newspaper flow summarized; separate record not reproduced in the official PDF
• Publisher's Independent Contractor Distribution Agreement — the term "news carrier" quoted; agreement not reproduced in the official PDF

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/195-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/195-1086.pdf

Original ruling text

State of California

Board of Equalization
Legal Division (MIC:85)
Telephone: 324-6592

Memorandum
To

:

Ms. Linda Avakian
Supervising Tax Auditor

195.1086
Date:

From :

Carl Bessent
Staff Counsel

Subject:

Sales of Non-Returnable Containers by Section 6015 Retailers

February 9, 1994

This memorandum is in response to a memo sent by Brad Bresnahan, Audit Evaluation and Planning, to Gary Jugum, Assistant Chief Counsel. You request our opinion as to whether the strapping used to bundle the S--- D--- U--- T--- (publisher) is sold to the independent contractor-distributor making the (publisher)’s sales of the newspapers with the strapping exempt as sales for resale or are the newspapers sold by the publisher making the (publisher) the consumer of the strapping in the distribution process? According to a phone conversation that we had on January 3, 1994, the relationship between the “independent contract distributor” and the (publisher) is a newspaper carrierpublisher relationship as compared with a distributor-publisher relationship. The (publisher) Independent Contractor Distribution Agreement refers to the contractor as a “news carrier”. Furthermore, you indicated that the newspapers go directly from publisher to carriers. Revenue and Taxation Code Section 6015(c) states in pertinent part that “a newspaper carrier is not a retailer and the retailer is the publisher or distributor for whom the carrier delivers the newspapers.” Thus, the (publisher) is the retailer of the newspapers. Containers such as strapping are taxable when sold at retail but are not taxable when sold for resale (Revenue and Taxation Code Section 6364; Regulation 1589). The strapping is delivered to the newspaper carriers but not delivered to the buyers along with the newspapers, thus, none of the exemptions in Section 6364 are applicable. On the other hand, the sale of rubber bands to be delivered to the buyers along with the newspapers for which the rubber bands serve as containers, are exempt from the sales tax as sales of nonreturnable containers (Sales and Use Tax Annotation 195.0960 3/4/60). The (publisher) provides the strapping with the newspapers to the newspaper carrier. The (publisher) must be considered the retailer of the newspapers but the consumer of the strapping and sales tax applies to its purchase of the strapping. CJB/md