Did using California television-station box numbers to receive and forward orders require an out-of-state advertiser to collect use tax?

Plain-English summary

An out-of-state company advertised tangible property on California television stations. Ads listed a non-California toll-free number and a box number at the station. Station personnel gathered mail addressed there and forwarded orders to New York; goods shipped to California from outside the state.

California said contracting with stations to forward orders made them the retailer's local representatives or agents for taking orders under section 6203. The box number also signaled that agency to prospective customers, and the advertising specifically targeted each station's California market.

The retailer had to register and collect use tax on all California sales, including telephone and mail orders, not only the mailed orders that established its covered status.

Common questions

Did the toll-free number itself have to be located in California?

No. The station box and local order-forwarding relationship supplied the connection.

Were only orders mailed to the television station covered?

No. The duty extended to all California consumer sales.

Did out-of-state shipment avoid the duty?

No.

Citations and references

• California Revenue and Taxation Code section 6203
• Scripto, Inc. v. Carson, 362 U.S. 207; National Bellas Hess v. Illinois, 386 U.S. 753; Miller Brothers v. Maryland, 347 U.S. 340
• Retailer's June 21, 1977 letter to Mr. Kenney — request letter not reproduced in the official PDF
• Television-station contracts, advertisements, box-number mail, forwarded orders, shipments, sales, and returns — operations described; underlying records not reproduced in the official PDF
• Urged Board registration — no application or registration outcome 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/220-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/220-0010.pdf

Original ruling text

STATE OF CALIFORNIA

220.0010

STATE BOARD OF EQUALIZATION
(916) 322-6083

July 6, 1977

Your letter dated June 21, 1977, which was addressed to Mr. Kenney, was referred to this office for reply. You state that you do not believe it necessary for your company to collect and pay over California use tax on sales to California residents. We understand that you sell tangible personal property to California consumers by means of television advertisements on stations in California. The advertisements list an “800” telephone number to call or a box number at the television station. The telephone number listed is not a California number. Mail addressed to the television station is gathered by the station and forwarded to your New York office. The goods are shipped to California customers from out-of-state locations. It is our opinion that the use of the television station box number is a sufficient connection with the state as to permit the state to require you to collect use tax from all your California customers, both telephone and mail order, and to file tax returns. Section 6203 of the California Revenue and Taxation Code requires every retailer engaged in business in this State and making sales of tangible personal property for storage, use, or other consumption in this State to collect the use tax from the purchaser. “Retailer engaged in business in this State” includes any retailer having any representative, agent, salesman, canvasser or solicitor operating in this State under the authority of the retailer for the purpose of taking orders for tangible personal property for storage, use, or other consumption in this State. It is our view that by contracting with you to forward orders to your office, television stations become representatives or agents authorized by you to take orders for your goods. Your advertising implies to prospective customers that the television stations are your agents. We therefore, conclude that you are engaged in business in this State within the meaning of the law.

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July 6, 1977
220.0010

It is our opinion that the requirement for you to collect use tax from California customers is permitted under the Constitution of the United States. In Scripto, Inc. v Carson, 362 U.S. 207, the United States Supreme Court upheld the right of a state to require an out-of-state retailer to collect use tax where the retailer was represented in the state by independent commission agents. It is our opinion that the television stations with which you contract provide essentially the same type of service. In National Bellas Hess v. Illinois, 386 U.S. 753, the Supreme Court stated that the out-ofstate retailer did “no more than communicate with customers by mail or common carrier as part of a general interstate business.” In that case, the retailer “did not advertise its merchandise for sale in newspapers, on billboards, or by radio or television in Illinois. Orders were mailed to and accepted at its Missouri plant.” Your situation is different. You are advertising by local television and not solely by mail or common carrier as part of a general interstate business. Indeed, the advertising is specifically aimed at the local market within the given television stations’ viewing area. Orders are not mailed to your out-of-state location by customers. In Miller Brothers v. Maryland, 347 U.S. 340, the court also ruled in favor of the out-of-state retailer, but it did so on a finding that the retailer’s advertising was not especially directed to Maryland. Your advertising is directed at California customers and is an effort to exploit the consumer market in California. Section 6203 imposes the duty to collect use tax upon a particular class of sellers. Because you fall in this class, you are required to collect use tax on all your sales to California consumers, not merely on those sales which cause you to fall in that class. We urge you to file the application for registration with the Board promptly, so that any interest or penalties may be minimized. Very truly yours,

H. L. Cohen
Tax Counsel

HLC/vs