When did the 1991 memorandum say an out-of-state newspaper or periodical publisher had to collect California use tax?

Plain-English summary

After repeal of the newspaper and periodical exemption, an internal memorandum considered when out-of-state publishers had California collection responsibility. It noted that many retail publication sales would instead be subject to sales tax and discussed when subscription activity involved a California branch, office, outlet, place of business, or connected agent.

For use tax, a publisher maintaining a California news bureau had a California office under section 6203(a) and had to collect on taxable subscriptions under the analysis then applied. A single employee working from home could also supply the stated connection.

Publishers without news bureaus could still be covered if California agents or representatives solicited subscriptions under subdivision (b), if substantial recurring mail solicitation received specified California banking, financing, collection, telecommunications, or marketing benefits under subdivision (f), or if common ownership connected the publisher with a similar California retailer under subdivision (g).

Common questions

Was a California news bureau enough by itself?

Yes, under the memorandum's historical analysis.

Could a publisher without a news bureau still have collection duties?

Yes, under the solicitation, local-benefit, or common-ownership grounds described.

Citations and references

• California Revenue and Taxation Code section 6203(a), (b), (f), and (g), including subsections added effective January 1, 1988
• Revenue and Taxation Code section 1620(a)(2)(B) — citation as printed; the memorandum does not resolve the citation
• National Geographic Society v. California Board of Equalization, 430 U.S. 551; Standard Pressed Steel Co. v. Washington Department of Revenue, 419 U.S. 560; and Norton Co. v. Department of Revenue of Illinois, 340 U.S. 534 — the official PDF misspells Illinois as "Illionois"
• Repeal of the newspaper and periodical sales-and-use-tax exemption — event stated; repealing act and legislative materials not identified or reproduced in the official PDF
• Proposed draft of Regulation 1683.5 — listed attachment not reproduced in the official PDF
• Publisher offices, news bureaus, employees, subscriptions, California agents, recurring mail solicitations, local benefits, and common ownership — categories discussed; no publisher-specific records or determination 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/220-0165.pdf

Original ruling text

State of California

Board of Equalization
Legal Division (MIC:82)

Memorandum

To:

Mr. Gary J. Jugum
Assistant Chief Counsel

From:

Stella Levy
Tax Counsel

Subject:

Nexus and Newspapers/Periodicals

220.0165

Date:

July 19, 1991

The repeal of the sales and use tax exemption for newspapers and periodicals, generates the issue of how the tax applies to out-of-state publications. Initially, it should be noted that in many (most?) cases sales tax will be the applicable tax because the publications will be sold at retail in this state. Additionally, sales tax (rather than use tax) will apply to subscription sales whenever there is participation by the seller’s “local branch, office, outlet or other place of business . . . or by any agent of the retailer having any connection with such branch, office, outlet, or place of business.” (Rev. & Tax. Code § 1620(a)(2)(B). See also, Norton Co. v. Department of Revenue of Illionois (1951) 340 U.S. 534.) The rule governing the applicability of use tax to an out-of-state retailer is contained in Revenue and Taxation section 6203. This statute was substantially amended, effective January 1, 1988, to add subsections (d) – (i) to the definition of “retailer engaged in business in this state.” Under this expanded definition, most out-of-state publishers would have nexus with California for use tax collection purposes. For example, under subsection (a) of section 6203, maintenance of an office constitutes nexus. The U.S. Supreme Court, in the leading case of National Geographic v. Cal. Equalization Board (1977) 430 U.S. 551, held that appellant’s maintenance of two offices in California constituted sufficient nexus to justify imposition of the use-tax-collection liability. In Standard Pressed Steel Co. v. Washington Rev. Dept. (1975) 419 U.S. 560, maintenance in the taxing state of one employee, who worked out of his home as a consultant, was a sufficient relationship to the state to support imposition of a direct tax upon a foreign corporation. Thus, under both our statute and Supreme Court precedent, any newspaper or periodical maintaining a news bureau in California would be obligated to collect use tax on their subscriptions.

Mr. Gary Jugum

-2-

July 19, 1991
220.0165

Out-of-state newspapers and periodicals, which do not maintain news bureaus, would have nexus if subscriptions were solicited in this state by their agents, representatives, salespersons or canvassers (Rev. & Tax. Code § 6203(b)) or by mail “if the solicitations are substantial and recurring and if the retailer benefits from any banking, financing, debt collection, telecommunication or marketing activities occurring in this state….” (Rev. & Tax. Code § 6203(f).) Yet another basis for nexus would be in those cases where the publisher is “owned or controlled by the same interests which own or control any retailer engaged in business in the same or a similar line of business in this state.” (Rev. & Tax. Code § 6203(g).)

SCL:cl
Attachment (Proposed Draft of Reg. 1683.5)