Did a Los Angeles design department require an out-of-state seller to register even though it handled no sales or orders?

Plain-English summary

An out-of-state seller of advertising materials maintained a Los Angeles design department. The office handled design and artwork sent from Illinois and returned completed work there. It did no direct selling; California orders came through mail or magazine advertising.

California said section 6203(a)'s office test operated independently from subdivision (b)'s selling, delivery, and order-taking test. Maintaining the California office made the retailer engaged in business and required registration even without a relationship between local design work and sales.

The memorandum is formally dated August 26, 1964 but says it responds to an August 31 memorandum. The source does not resolve that chronology conflict.

Common questions

Did the Los Angeles office have to take orders?

No.

Did its work have to generate California sales?

No.

Citations and references

• California Revenue and Taxation Code section 6203(a)–(b)
• Out-of-State Compliance's August 31 memorandum — request memorandum not reproduced in the official PDF; its date postdates the formal August 26 response
• Company "P," interstate advertising-material sales, Los Angeles design department, Illinois artwork transfers, mail solicitation, and magazine advertising — facts introduced as the Board's understanding; company identity and underlying corporate, office, design, artwork, advertising, order, and sales records not reproduced in the official PDF
• Required Board registration after the opinion — no application, permit, 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/220-0200.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Out-of-State – Compliance (DLF)

From:

Tax Counsel (PM)

Subject:

“P”

220.0200

August 26, 1964

This is in reply to your memo of August 31 concerning the question of whether the above company is “engaged in business in this state” under Section 6203. As we understand it, the company makes interstate sales of advertising materials to various manufacturers. It maintains its design department at Los Angeles. This office handles design work and art work which is obtained from Illinois and referred back to Illinois when completed. There is no direct sales activity; orders from California customers are solicited by mail or through magazine advertising. It is our opinion that “P” is “engaged in business in this state” within the meaning of section 6203(a). The definition contained therein is entirely independent of the definition contained in paragraph (b). Hence, an out-of-state retailer who maintains an office or other place of business in California can be required to register with the Board even though such office or other place of business is not maintained “for the purpose of selling, delivering, or the taking of orders.” In other words, when such a “nexus” exists between the retailer and the state, it is unnecessary to find any relationship between the local office and the sales activity.

PM:o’b

[1b]