Who was the retailer when employer-issued incentive points were redeemed for merchandise?

Plain-English summary

An employer gave salespeople points or similar evidence of achievement, and a premium house exchanged merchandise for those points. The memorandum treated the points as valuable consideration and the premium house as the retailer.

If the employer instead transferred the incentive merchandise directly, the employer was the retailer. In either structure, the memorandum treated the employee as the person receiving the retail sale.

It therefore placed any applicable use tax on the employee, not the employer, and said those principles were sufficient for the audit under review.

Citations and references

• The source memorandum cites no statute or regulation by number.
• Apr. 25, 1967 Out-of-State Auditing letter, Trigueros premium memorandum, and M audit — status and approval supplied; complete documents, taxpayer identity, period, facts, workpapers, and findings not reproduced in the official PDF
• Employer points or other indicia, premium-house redemption, merchandise transfer, direct-employer alternative, retail sale to salesperson, and possible use tax — illustrative facts and rules supplied; program terms, point records, premium catalog, employer-premium-house agreement, merchandise orders and invoices, transfers, valuations, and tax records not reproduced in the official PDF
• Official Annotation 280.0720's points consideration, premium-house or employer retailer status, employee retail sale, and employee-use-tax summary — annotation supplies no Trigueros memorandum, M-audit facts, program record, or later audit result
• Possible later M-audit action, assessment, payment, refund claim, appeal, or other final outcome — not supplied in the official PDF

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 280.0720
• Original supporting opinion: 280.0720 PDF

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Out-of-State – Auditing (JDD)

From:

Tax Counsel (TPP)

280.0720

Date:

Sept. 11, 1967

In your letter of April 25, 1967 to the legal staff you stated that you were withholding action on the “M” audit, pending word from the legal staff on the basic study of the premium question by Mr. Trigueros. I am attaching a copy of Mr. Triguero’s memo on the premium question which I have reviewed and approved. As concluded by Mr. Trigueros, premium houses are retailers of premium merchandise which they transfer to recipients in exchange for stamps, coupons or points, which constitute valuable consideration. Thus, for example, where an employer gives its salesmen “points” or other indicia as incentives, and a premium house redeems the points for merchandise which it transfers to the salesmen, the premium house and not the employer is the retailer. If the merchandise is transferred by the employer directly to the salesman as an incentive award, the employer is the retailer. In either case, the retail sale is made to the salesman. The salesman and not the employer is subject to any use tax that may apply. The above principles should provide a sufficient basis to proceed with the “M” audit.

TPP:kc

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