Did distributing photoprocessing mailers and using a California post-office box to forward orders require the out-of-state company to collect use tax?

Plain-English summary

An out-of-state photoprocessing company placed preaddressed mailers in newspapers circulated in California. Customers sent orders to a San Jose post-office box; someone gathered and forwarded them to Pennsylvania for processing, and completed orders returned by U.S. mail.

California said the local box was more than a passive address. The arrangement implied an in-state representative gathering and forwarding customer orders under the retailer's authority, which satisfied section 6203(b).

The company therefore had to register and collect use tax from California customers even though processing and return delivery occurred outside the state.

Common questions

Did the company need California employees or a processing plant?

No.

Why did the post-office box matter?

The letter inferred a California representative retrieved and forwarded the orders.

Did out-of-state processing eliminate the collection duty?

No.

Citations and references

• California Revenue and Taxation Code section 6203 and subdivision (b)
• Spokane Film, Inc. v. State Board of Equalization, 1 Civil 32899 (1974), identified by the source as an unpublished California appellate opinion
• Company's June 1, 1977 letter to Senior Tax Representative H. W. Nyland — facts described; request letter not reproduced in the official PDF
• Registered-trade-name relationship, California newspaper mailers, San Jose post-office box, Pennsylvania plant processing, order forwarding, and U.S.-mail return delivery — facts stated or inferred; underlying corporate, advertising, mailer, post-office-box, forwarding, order, processing, and delivery records not reproduced in the official PDF
• Inferred unidentified California representative who gathered and forwarded post-office-box mail — inference stated; representative's identity, authority, and activities not independently supplied in the official PDF
• Enclosed copy of Spokane Film — enclosure not reproduced in the official PDF
• Required California use-tax registration, collection, and reporting after the opinion — no application, return, remittance, audit, or final 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/220-0190.pdf

Original ruling text

220.0190

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

July 15, 1977

--- --- ----- --- ----- --- --Dear Mr. ---:
Your letter of June 1, 1977 to Mr. H. W. Nyland, Senior Tax Representative, has been referred to this office for reply. Your inquiry concerned whether or not your company is required to register with the California State Board of Equalization and collect and remit use tax as a result of purchases made by California consumers. You state that “A” is a registered trade name of “B”, Inc.; that “B”, Inc. does not have any employees in California, nor does it “receive orders or perform processing and delivery services in California. Your company does, however, distribute preaddressed “mailers” in newspapers with a circulation in California. The orders from California customers are received and processed at the company’s plant in Pennsylvania. You maintain a post office box in San Jose, California. You describe your California address as “merely a forwarding address.” When the orders have been processed they are returned to the California customers through the U.S. Mail. It is the position of your company that, in view of the above, “B”, Inc. should not be required to obtain a California Sales Tax Registration Certificate. For the following reasons it is the opinion of this office that “B” is in fact required to register, collect and remit the applicable tax due under the California Sales and Use Tax Law. California Sales and Use Tax Section 6203 requires that “any retailer engaged in business in this state and making sales of tangible personal property for storage, use or other consumption in this state shall at the time the storage, use, or other consumption becomes taxable, collect the tax from the purchaser.” A retailer engaged in business in this state has been expressly defined by Section 6203(b) to include: “Any retailer having any representatives, agent, salesman, canvasser or solicitor operating in this state under the authority of the retailer or its subsidiary for the purpose of selling, delivering, or the taking of orders for any tangible personal property.”

Mr. --- ---

-2-

July 15, 1977
220.0190

Implied in the summary of activities you perform in California is the fact that your company utilizes some sort of representative in California for the purpose of gathering the “mailers” at the post office and forwarding them to your Pennsylvania headquarters. It is the long-standing position of the Board that when a company, such as yours, distributes mailers in California circulated newspapers and utilizes a California post office box for purposes of forwarding orders of its California customers that the requirements of Section 6203(b) are met. I am enclosing, for your reference, a copy of an unpublished California Appellate opinion (Spokane Film, Inc. v. State Board of Equalization, (1974) 1 Civil 32899) in which the court held that an out-of-state photoprocessing company, distributing mailers in California and utilizing California post office boxes, was required to collect use tax due on purchases made by its California customers and remit the same to the Board. Accordingly, your company is required to register under the California Sales and Use Tax Law for a Certificate of Registration – Use Tax and collect and report the tax due from your California customers. The fact that the actual processing of the orders is done in Pennsylvania and the orders are returned to California customers through the United States Mail does not serve to limit your responsibility in this regard. Very truly yours,

Mary C. Armstrong
Legal Counsel

MCA:jw
Enclosure
bc:

Out-of-State – Compliance
(A. B. Garceau, Jr.)