Were a printer's later wrapping and packing charges taxable when completed merchandise was held for future delivery?

Plain-English summary

A printer completed and billed merchandise but held it for future delivery, then separately charged to wrap and pack it for shipment.

Tax counsel said wrapping and packing ordinarily were services forming part of the sale and could not be deducted, even when separately stated. On the described facts, title probably did not pass until shipment, so the later charge remained taxable.

If the printer could establish that title passed when the printing order was completed and that it thereafter held the goods only as bailee, the later wrapping and packing service could be nontaxable. The portion charged for wrapping or packing material itself would still be taxable because the material was sold with the merchandise.

Citations and references

• California Revenue and Taxation Code section 6012, quoted as including services that are part of a sale in gross receipts (as cited in the supporting letter) — the live annotation supplies no statutory citation
• Supporting-letter header references “1472 Wrapping and packing of merchandise held for future delivery” and “0857 Charge for wrapping and packing by seller ordinarily taxable” — source system, document identities, dates, texts, and later treatment not identified or supplied in the official PDF
• July 21, 1950 request concerning merchandise previously ordered, completed and billed, held by a printer for future delivery, and later wrapped and packed for shipment — request, attachments, and correspondence history not reproduced in the official PDF
• Printing order, completion and original billing, title terms, custody and bailment arrangement, shipment instructions, later wrapping-and-packing charge, and packing materials — order, contract, invoice, title and acceptance records, warehouse records, shipping documents, later invoice, cost allocation, and material records not reproduced in the official PDF
• November 3, 1950 tax-counsel response signed by E. H. Stetson with an empty copied-recipient line, stating title probably did not pass until shipment and describing a conditional bailee alternative — no requester reply, completed transaction, tax return, audit, assessment, refund claim, agency adoption, appeal, or later outcome supplied
• Official Annotation 295.1460's ordinary-sale rule, conditional post-title bailee exception, packing-material qualification, and November 3, 1950 date — annotation omits the printer and July 21 request, header references 1472 and 0857, section 6012, probable-title assumption, missing records, later outcome, and reliance status and supplies no additional proceeding record

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/295-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/295-1460.pdf

Original ruling text

295.1460

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1472 Wrapping and packing of merchandise held for future delivery. 0857 Charge for wrapping and packing by seller ordinarily taxable.

November 3, 1950

Dear
With apologies for the delay, this is in answer to the question asked in your letter dated July 21, 1950, regarding the application of the sales tax to charges for wrapping and packing for shipment of merchandise previously ordered but held by the printer for future delivery. In the ordinary sale no deduction is allowable to the retailer on account of the cost of wrapping and packing the goods sold, whether or not such a charge is separately stated. While we understand the fact that in the case presented the wrapping is performed after the job has been completed and billed, we are of the opinion that title probably does not pass until actual shipment is made in which case we find no basis to classify the charge for wrapping and packing as other than "services that are a part of the sale", within the meaning of Section 6012 of the Sales and Use Tax Law, defining gross receipts to include such services. Could it be established that title to the merchandise passed to the buyer at the time of completion of the printing order and that thereafter the printer merely held the merchandise as bailee, the later additional charge for wrapping and packing could be considered nontaxable, except as to that portion representing the sales price of the wrapping or packing material furnished. Such material is, of course, regarded as sold along with the merchandise, and since the original billing did not include the sales price of this merchandise it would necessarily be included as a part of the subsequent billing for wrapping and packing.

Very truly yours,

E. H. Stetson
Tax Counsel
EHS:ph
cc: