When was a printed product enclosure resold with the goods rather than consumed as advertising?

Plain-English summary

A doll seller included folders with its products. Some contained stories or verses about the dolls; others only listed additional dolls available for purchase.

The letter treated the story-and-verse folders as purchased for resale because buyers wanted their educational and collection-enhancing information. It recommended removing their printing price from the tax measure. Folders that only listed other dolls were advertising material consumed by the seller.

The general rule turned on primary purpose. Directions, instructions, or information desired or needed by the product's consumer could remain resale property despite incidental advertising, while primarily advertising enclosures were taxable to the business using them. The source invited submission of doubtful enclosures for individual review.

The source letter is dated May 9, 1951; the official annotation metadata's May 29 date does not match it.

Citations and references

• Historical California Sales and Use Tax Ruling 49, last paragraph — characterized in the official PDF; ruling text not reproduced there
• Counselor's Apr. 20, 1951 letter, company file, petition for redetermination, and Mar. 28 determination — procedural history supplied; letter, file, petition, determination, audit workpapers, and separate notice not reproduced in the official PDF
• Story or verse folders, list-only folders, Hollywood Dolls, educational and collection value, printing sales price, and recommendation to eliminate qualifying-folder price from the tax measure — facts and recommendation supplied; dolls, packaging, folder editions, printer agreement and invoices, allocation, customer evidence, and computation not reproduced in the official PDF
• Official Annotation 280.0500's advertising-primary-purpose and desired-or-needed consumer-information test dated May 29, 1951 — annotation conflicts with the PDF's May 9 date, omits the doll and redetermination facts, and supplies no additional source or final Board action
• Possible later Board redetermination, audit adjustment, payment, refund claim, appeal, or other final outcome after the recommendation — not supplied in the official PDF

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 280.0500
• Original supporting opinion: 280.0500 PDF

Original ruling text

280.0500

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

May 9, 1951
Mr. -. -. V--Accounting and Tax Counsellor
P--- I--- Association --- Olympic
--- --- X, California
Account No. -- - XXXXXX
A. A. S--- P---Company
Dear Mr. V---:
After receipt of your letter of April 20 we reviewed the file of the A. A. S--- P--- Company which had filed a petition for redetermination of the determination which we had made under date of March 28. While the matter may be not entirely free from doubt, we have reached the conclusion that the folders containing stories or verses relating to the dolls with which the folders are enclosed when the dolls are sold may be regarded as a sale for resale by the printer of the folders. Those folders that contain only a list of other dolls available we believe should be considered as consumed by the seller of the dolls as advertising material. The stories and verses appear to be of interest to the purchaser of the dolls who desires to have them for their educational value, and to increase the value of the collection of dolls. Accordingly, we have advised the company that we would recommend to the Board that the sales price of the folders containing the stories or verses be eliminated from the measure of the tax. You indicate the need of clarification of the last paragraph of Ruling 49 stating that tax applies to sales of such items as advertising matter enclosed with the property sold. We think that if the enclosure is primarily for advertising purposes the tax is applicable. If, however, the enclosure is in the nature of directions, instructions, or information desired or needed by the consumer of the goods, the mere fact that advertising is also contained in the enclosure will not cause the tax to apply. In some instances it may be difficult to determine the primary purpose of inserting the enclosure in the package. In doubtful cases we shall be glad to examine the enclosures as we have in the case of the enclosures with the Hollywood Dolls. Very truly yours,

E. H. Stetson
Tax Counsel
EHS:ph