Who was the consumer when a California firm shipped skill-or-chance prizes directly to radio or television contestants?

Plain-English summary

The PDF first reproduces a 1953 letter about a Chicago firm shipping merchandise to program contestants and sales-performing stores. That letter treated the sponsor as consumer and imposed use tax on prizes shipped to California contestants.

The official source then adds a January 10, 1992 memorandum stating that the 1953 letter did not accurately reflect Annotation 280.0840 and should be replaced. The replacement facts involve a California firm paid by the sponsor to send merchandise directly to California radio and television contestants who won by skill or chance.

Under the controlling replacement memorandum, the sponsor was consumer under Regulation 1670(d) even though the seller shipped directly to each recipient. Sales tax applied to the California firm's sale of the merchandise to the sponsor. This page uses the replacement memorandum's 1992 date and result.

Citations and references

• California Sales and Use Tax Regulation 1670(d)
• Historical California Sales and Use Tax Ruling 72, discussed only in the superseded 1953 letter
• Sponsor's Sept. 30, 1953 request — facts and question recited; year, letter, attachments, and program records not reproduced in the official PDF
• David H. Levine's Jan. 10, 1992 replacement memorandum and direction to add its date to the annotation — replacement and direction supplied; correction request, review file, editorial action, and response not reproduced in the official PDF
• Sponsor payments, California-firm merchandise sale, direct California-recipient shipments, radio and television programs, skill-or-chance awards, and seller location — replacement facts supplied; sponsor-seller agreement, contestant rules and results, orders, invoices, payments, shipping and delivery records, merchandise costs, and tax records not reproduced in the official PDF
• Official Annotation 280.0840's sponsor-consumer and direct-shipment summary — live page still states only Dec. 4, 1953 despite the 1992 direction, does not distinguish the superseded Chicago-firm facts from replacement California-firm facts, and supplies no additional transaction record
• Possible later annotation correction, prize transfer, return filing, audit, assessment, payment, refund claim, appeal, or other agency action — not supplied in the official PDF

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 280.0840
• Original supporting opinion: 280.0840 PDF

Original ruling text

280.0840

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

December 4, 1953

S--- - K--- F---, Inc.
--- --California
Attention:

Your letter of September 30
Account No. -- - XXXXX

Mr. T. E. L---

Gentlemen:
You inquire concerning the application of the California sales or use tax to merchandise which is shipped by a Chicago firm direct to recipients in California and in other states. The recipients either are persons who have been contestants on your radio or television programs or are stores which sell a given number of cases of your products. The merchandise given away is not of your manufacture. You pay the Chicago firm for the merchandise and for their services. The recipient does not know where the merchandise is coming from. California has both a sales tax and a use tax. The sales tax applies to sales made in this State. The use tax applies to the use in this State of property which has been purchased for use in this State. Since the use tax does not apply to any transaction which is subject to sales tax, it finds its principal application to purchasers from out-of-state sellers. We enclose Ruling 72, Gifts and Premiums. Since the winning of the merchandise depends upon chance or skill, you are regarded as giving away this merchandise rather than selling it. Accordingly, you are the consumer and the use tax applies to all of such merchandise which is shipped to California recipients. Yours very truly,

Bill Holden
Junior Counsel

BH:ja

State of California

Board of Equalization

Memorandum

To:

Mr. Robert Owens

From:

David H. Levine

Subject:

Annotation 280.0840

280.0840

Date:

January 10, 1992

This annotation does not accurately reflect the back-up letter. Fortunately, the annotation states the correct rule. This memorandum should replace the existing letter dated December 4, 1953 as the back-up to Annotation 280.0840. A sponsor of radio and television programs inquired as to application of tax to transfers of merchandise to recipients who were contestants on the radio and television programs. The sponsor pays a California firm for the merchandise, and the merchandise is sent by that firm directly to the recipients in California. Those recipients won the merchandise by skill or chance. Since the merchandise is won based on skill or chance, the sponsor is the consumer of that merchandise under subdivision (d) of Regulation 1670 even though the property is sent directly to the recipient. Sales tax applies to the sale of the merchandise to the sponsor.

DHL:es
4237I

cc:

Ms. Victoria Lani Arena:
annotation.

David H. Levine
Please have the date of this memorandum added to the