Would a proposed cooperative-style store's separately stated 6% administrative fee be part of taxable gross receipts?

Plain-English summary

A proposed cooperative-style store would house concessionaires who would sell merchandise to members below average retail prices. In addition to proposed rent, the concessionaires would pay administrative and promotional expenses, and a hypothetical member invoice added a separately stated 6% administrative fee.

The Board concluded that the fee was taxable. Section 6012 measured tax by the total amount a customer had to pay to receive the merchandise, without deducting labor, service, or other seller expenses.

Separately stating the administrative fee did not remove it from the selling price.

Citations and references

• California Revenue and Taxation Code section 6012, described as including the total selling price without deduction for labor, service, or any other expense in the tax measure (as cited) — the live annotation supplies no statutory citation
• Proposed cooperative-type store housing concessionaires, sales to members of a redacted organization below average retail prices, 5% rent based on concessionaire net sales, and a 6% administrative and promotional expense — proposal, organization identity, membership terms, concession agreements, rent records, and expense budgets not reproduced in the official PDF
• Hypothetical invoice showing a $100 selling price, $3 of sales tax at a historical 3% rate, and a $6 administrative fee at 6% — actual invoices, transactions, tax returns, and payment records not reproduced in the official PDF
• November 23, 1954 assistant-counsel response signed by Bill Holden and copied to Oakland Auditing — request, requester identity, attachments, audit inquiry, reviewer record, and copy-recipient record beyond the printed line not supplied
• Official Annotation 295.1480's proposed cooperative-store structure, 6% fee, separately stated treatment, taxable conclusion, and November 23, 1954 date — annotation omits the redacted member organization, 5% rent, promotional-expense description, hypothetical $100/$3/$6 invoice, historical 3% rate, section 6012, Oakland copy, missing records, prospective posture, later outcome, and reliance status and supplies no additional proceeding record
• The prospective advisory conclusion — no completed store, concessionaire sale, customer invoice, tax return, audit, assessment, refund claim, agency adoption, appeal, or later outcome supplied

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/295-1480.pdf

Original ruling text

STATE OF CALIFORNIA

295.1480

STATE BOARD OF EQUALIZATION

November 23, 1954

A cooperative type store will house a number of concessionaires who will sell to members of the --at prices below average retail. The concessionaires pay rental of 5 percent of their net sales. In addition, the concessionaries will pay 6 percent as administrative and promotional expense. A sales invoice might show a selling price of $100 plus a 3 percent sales tax of $3 plus a 6 percent administrative fee of $6. You ask if the tax applies to this charge for administrative fee. Section 6012 of the Sales and Use Tax Law includes in the measure of the tax the total selling price without deduction on account of labor or service costs or any other expense. The total selling price is the total amount which the customer must pay in order to receive the merchandise. It is our opinion, therefore, that the administrative fee, even though separately stated, is a part of the selling price and is subject to sales tax. Very truly yours,

Bill Holden
Assistant Counsel

BH:ja
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Oakland - Auditing