How were restaurant matchbooks treated when some accompanied cigarette sales and others were freely taken by diners?

Plain-English summary

A restaurant made advertising matchbooks available at its cashier. Customers buying cigarettes always received one, while diners who did not buy cigarettes could simply take one without paying anything extra.

The memorandum treated the cigarette-purchase matchbooks as premium articles resold with the cigarettes, so their receipts were included in the cigarette sale price. Matchbooks taken by non-cigarette customers were advertising giveaways consumed by the restaurant.

Because the restaurant could not know at purchase which identical matchbooks would be resold and which would be consumed, it could acquire all of them under resale certificates. It then had to report the cost of the freely taken matchbooks as self-consumed property.

Citations and references

• Historical California Sales and Use Tax Ruling 72
• C. F. Hattesen's inquiry and statement of the restaurant's diner and cigarette-customer matchbook practices — facts recited; request form, date, notes, and separate record not reproduced in the official PDF
• Restaurant matchbook purchases, advertising, diner pickup, cigarette premiums, inability to identify future disposition, resale certificates, gross receipts, cigarette sale prices, self-consumed costs, and Line 2 returns — facts and reporting direction supplied; purchase orders, invoices, inventory, distribution counts, cigarette receipts, certificates, allocations, workpapers, and returns not reproduced in the official PDF
• Official Annotation 280.0180's ex-tax purchase, cigarette-premium sale, and nonbuyer self-consumption summary — annotation supplies no additional Ruling 72 text, transaction, allocation, reporting, or implementation record
• Possible later allocation, return filing, audit, assessment, payment, refund claim, appeal, or other agency action — no follow-up or final outcome supplied in the official PDF

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 280.0180
• Original supporting opinion: 280.0180 PDF

Original ruling text

State of California

Board of Equalization

Memorandum

To:

C. F. Hattesen

From:

W. W. Mangels

Subject:

R--- C. C--XXX --- Street
---, California

280.0180
September 30, 1953

C-XXXXX

You state that C---, a restaurant, has available for its patrons match booklets which advertise the restaurant. In other words, when persons have finished dining and pay their bill at the cashier’s stand the may “grab” a match booklet at the counter without paying any additional sum. Furthermore, purchasers of cigarettes at the cashier’s desk are always furnished these match booklets without paying any additional charge. You inquire concerning the application of the tax to these transactions. It is our opinion that if a person purchases a meal and merely takes these matches from the counter without buying any cigarettes, we should regard C--- as giving the matches away for advertising purposes under Ruling 72(a). On the other hand, since purchasers of cigarettes are always furnished with match booklets, we are of the opinion that match booklets furnished to cigarette purchasers must be regarded as sold as a premium article under the last paragraph of Ruling 72. The net result is this. C--- may purchase all of these advertising booklets under resale certificates since, we understand, that at the time of purchase he will not know which will be resold (as a premium article) and which will be consumed by him (these merely incidentally “picked up” by meal consumers not buying cigarettes). Thereafter, the gross receipts from match booklets sold with cigarettes will be included in the sale price of the cigarettes under the last paragraph of Ruling 72. On the other hand, C--will have to report as self-consumed on Line 2 of his return the cost of match boxes “picked up” by non-cigarette purchasing customers.

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