Which attached labels were exempt product labels and which were taxable shipping or vendor-use labels?

Plain-English summary

California distinguished an exempt label from a taxable shipping tag by primary use. A label identifying, describing, or warning about the product—such as “fragile,” “glass handle with care,” or “inflammable”—could be resold with a nonreturnable container because it primarily benefited the ultimate purchaser.

Shipping instructions, mail classifications, price information, and similar labels used for the vendor's own purposes were taxable. Permanently attaching a price label did not change that result.

Counsel found most submitted samples exempt but identified various airmail, shipping, special-delivery, C.O.D., first-class-mail, and similar labels as taxable or potentially taxable. Blank or ambiguous labels depended on whether their actual purpose related to the product or merely directed shipment.

Common questions

Was every label attached to a package exempt?

No.

Did permanent attachment make a price label exempt?

No. Primary purpose controlled.

How were ambiguous labels handled?

Their actual use and relation to the product determined the answer.

Citations and references

• Sales and Use Tax Ruling 49 — label and tag distinction applied; copy and version details not supplied in the official PDF
• Historical Annotation 1300.20 — price-label treatment cited; copy and date not supplied in the official PDF
• Los Angeles District Principal Auditor's April 24, 1969 memorandum and attached label samples — taxability request and sample numbers, wording, and uncertain purposes described; separate memorandum and physical labels not reproduced in the official PDF
• Prior Board rulings treating “label” and “tag” as general terms — principle stated; names, dates, identifiers, and separate rulings not supplied in the official PDF
• Return of the submitted label samples to the district as requested — return stated; no separate transmittal record supplied 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/195-1740.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Los Angeles District - District
Principal Auditor (JTQ)

From:

Tax Counsel (TPP:JM) – Headquarters

Subject:

Ruling 49

195.1740

Date:

July 7, 1969

In your memorandum of April 24, 1969, you requested our opinion regarding the taxability of various “labels” attached to your memorandum. Our research reveals that the distinction between a taxable shipping tag and an exempt label turns primarily on the fact of use by the vendor for his own purposes, rather than for the use or benefit of the customer. It has been argued that the shipping tag or label is attached to the nonreturnable container and sold along with the product and should be exempt as an item to be resold. However, it appears to be our position that in the case of the shipping label, the vendor is making a use of the label for a purpose other than for resale. The shipping label is not considered to be a part of or sold with the nonreturnable container since it is not an actual part of the container, does not describe the contents thereof nor relate to the product sold; whereas the “fragile” labels or those which describe the type of product, such as “glass handle with care” or the character of the product such as “Inflammable”, do describe or relate to the product sold. These instructional or cautionary labels primarily benefit the ultimate purchaser rather than the seller, and are considered as resold with the nonreturnable container prior to use by the vendor. We have ruled that the terms “label” and “tag” are used in the ruling in a general sense. The fact that the price is shown on a “label” permanently affixed to the container rather than on a “tag” which is secured by a string or in a manner equally subject to ready removal does not change the tax status. In both cases the primary purpose is for the use of the vendor (Anno. 1300.20).

Los Angeles District – District
Principal Auditor (JTQ)

-2-

July 7, 1969
195.1740

Of the sample labels submitted, we believe all are exempt with the exception of the following: No. 603 No. 400 No. 605

No. 903
No. 914
No. 915
No. 918
No. 919
No. 924
No. 925
No. 926

Via Airmail
Shipping Label
Blank Perforated Labels
(Depending upon the purpose for
which used, these may be exempt.)
Essentially a shipping label
Special Delivery – Shipping
Instruction
Employee Parcel (We are uncertain
as to the purpose of this label.)
Today Sure! – (uncertain of purpose.)
C.O.D. – Shipping Instructions
Rush – (Uncertain of purpose.)
First Class mail (Shipping Instructions)
Special Handling – (Uncertain of
purpose – if related to Fragile
character of product, probably is
exempt.)

These labels for which we have indicated an uncertainty as to purpose, may be exempt depending on whether they are primarily related to the product or are merely shipping instructions. We are returning the labels to you as requested.

JM:ph
Attachment