Did placing commissioned catalog-order centers in California public libraries make the participating mail-order firms collect use tax?

Plain-English summary

A proposed business would place binders of mail-order catalogs and universal order forms in public libraries. Library users could choose products, complete a form, and leave it at the center. The operator would collect and forward orders to the relevant retailer, earn a 10% commission, and pay libraries 5% of its gross receipts for the space.

California said the center operator would be each participating mail-order retailer's representative or agent for selling and taking orders under section 6203(b).

Each retailer would therefore have to collect use tax on all taxable retail sales delivered to California residents, not only orders generated at the library centers.

Common questions

Did the libraries themselves process the orders?

The described operator collected and forwarded the forms; libraries supplied the center space for a share of receipts.

Was collection limited to orders placed at a library?

No. The memorandum extended the duty to all California retail sales by each participating retailer.

Citations and references

• California Revenue and Taxation Code section 6203(b)
• Robert Nunes's September 27, 1985 memorandum to Legal — request memorandum not reproduced in the official PDF
• September 27, 1985 Sacramento Bee article attached to the request — article summarized but not reproduced in the official PDF
• Assumption that the newspaper article's details were accurate
• Proposed public-library catalog centers, catalog binders, universal order forms, order processing and forwarding, ten-percent retailer commission, and five-percent library space payment — proposal described; no business, retailer, library, catalog, form, processing, commission, space, or contract records reproduced in the official PDF
• Inference that the operator apparently collected and forwarded order forms — inference stated; no completed order or forwarding record supplied in the official PDF
• Potential retailer registration and use-tax collection after the opinion — no account number, participating-retailer list, implementation record, 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/220-0221.pdf

Original ruling text

State of California

Memorandum

To:

Mr. Robert Nunes

From:

Legal (John Abbott)

Subject:

W--- H--- – H--- C--- Library (No account number)
Engaged in business – mail order catalog sales

Board of Equalization

220.0221

December 2, 1985

In your September 27, 1985 memorandum to the legal staff, you attached a copy of a news article from the September 27, 1985 Sacramento Bee, regarding a new marketing approach for mail order sales. Assuming the details provided in the article are accurate, you asked whether this represents sufficient nexus to hold the mail order firms responsible for collection of use tax. In summary, the Sacramento Bee article describes the operations of a new firm, the H--- C--Library, organized by W--- H---. Mr. H--- proposes to install mail order catalog centers in public libraries. The catalog center will enable a person using the catalog center to make a selection from a catalog in a binder, and then fill out a universal mail order form and deposit it at the center. Mr. H--- then processes the mail order form and receives a 10% commission on the amount of the order from the mail order firm. In turn, the library will receive 5% of Mr. H---’s gross receipts for providing space for the catalog centers. In our opinion, each of the mail order retailers whose catalogs are displayed in the catalog center would be a retailer engaged in business in this state within the meaning of Revenue and Taxation Code Section 6203(b). The H--- C--- Library would constitute a representative or agent of the retailer for the purpose of selling and taking of orders for tangible personal property. Thus, the mail order firms would be responsible for collecting the use tax from California customers on all of their retail sales of tangible property delivered to California residents, regardless of whether the order was generated through the H--- C--- Library or otherwise. We think it is clear that Mr. H--- is operating as an agent or representative of the mail order firms because he processes the orders from customers, apparently by collecting the order forms and forwarding them to the appropriate mail order retailer, and because he receives a commission on each order received. JA:hb