How did California tax circulars printed and transferred outside the state, then mailed or shipped into California?

Plain-English summary

A California business ordered advertising circulars from an out-of-state printer. Its written purchase order expressly transferred title at the printer's out-of-state location when printing was completed, and the circulars were mailed or delivered to carriers outside California.

Tax counsel agreed that the printer's sale occurred outside California and was not subject to California sales tax. Bringing some circulars into California could still create use tax, however, depending on what happened to them here.

The small share shipped to the customer's California stores for use as store copies was taxable. Circulars sent to publications were assumed to become inserts in newspapers or periodicals exempt under section 6362 and Regulation 1590(a)(3), so those copies were not taxable. Circulars mailed by the out-of-state printer directly to California addresses were also treated as an out-of-state use. Only the charges allocated to the California store copies were therefore subject to use tax under the described facts.

Although the purchaser owed the use tax, the printer had a California agent and was treated as a retailer engaged in business in the state. The printer consequently had to collect and remit the tax on the store copies.

The May 14 request, purchase and printing orders, mailing and publication records, invoices, tax amount, allocation, audit, returns, collection record, and later outcome are not reproduced. The live annotation publishes the historical tax conclusions and adds only a note that section 6379.5 later changed the law concerning printed sales messages; it does not give that provision's text or say how it affects these facts. The annotation omits the less-than-one-percent figure, mailing-list detail, printer-agent collection analysis, and most provenance and limits.

Common questions

Why was the printer's sale outside California sales tax?

The described purchase order expressly passed title to the California purchaser at the out-of-state printer's location when printing was completed. Tax counsel treated the sale as occurring outside California under Regulation 1620(a)(1). The purchase order itself is not reproduced.

Which circulars did counsel treat as subject to use tax?

Only the charges allocable to the residue sent to California stores for use as store copies. The source described that residue as less than one percent of the printing. Counsel assumed that circulars sent to publications became inserts in exempt newspapers or periodicals, and treated direct mailing completed outside California as an out-of-state use.

Who had to collect the use tax on the store copies?

The purchaser was liable for use tax, but counsel said the out-of-state printer had to collect and pay it because the printer had a California agent and therefore qualified as a retailer engaged in business in the state under the cited sections 6202 through 6204.

Does the live annotation identify a later statutory change?

Yes. It notes a subsequent change under Revenue and Taxation Code section 6379.5 concerning printed sales messages. The annotation does not reproduce the statute, identify its effective date, or decide its application to this transaction, so this historical letter does not establish the current result.

Citations and references

• California Revenue and Taxation Code section 6362 and Regulation 1590(a)(3) — cited for the assumed publication and inserted-circular exemption; complete texts, qualifications, procedures, amendments, later history, and current law not supplied
• California Sales and Use Tax Regulation 1620(a)(1) and (b) — cited for the out-of-state sale and California-use rules; complete text, conditions, exceptions, amendments, later history, and current law not supplied
• California Revenue and Taxation Code sections 6202, 6203, and 6204 — cited for purchaser liability and the California-agent printer's collection duty; complete texts, agent and retailer requirements, procedures, amendments, later history, and current law not supplied
• California Revenue and Taxation Code section 6379.5 — identified only by the live annotation as a later change concerning printed sales messages; text, effective date, application, amendments, later history, and current law not supplied
• May 14 request and June 15, 1982 response — no request, orders, transactional records, invoices, allocation, audit, returns, tax amount, collection record, assessment, claim, appeal, or later outcome supplied
• Official Annotation 325.0001's facts, historical conclusions, date, and later-law note — omits the request date, less-than-one-percent figure, mailing-list detail, collection analysis, named counsel, missing records, later outcome, and reliance status and supplies no additional transaction 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/325-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-0001.pdf

Original ruling text

325.0001

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
(916) 445-8900

June 15, 1982

Mr. A--- M. G--P---, C--- & G----- --- ----- ---, CA XXXXX
Dear Mr. G---:
RE:

G--- P---, Inc.
SR -- XX-XXXXXX

Your letter of May 14, 1982 requests advice on the application of sales or use tax to the following factual situation: “A California business orders a number of advertising circulars to be printed by an out-of-state printer, the written purchase order provides that title will pass to the California business at the location of the out-of-state printer at the time the printing order is completed. “The order is communicated by United States Mail or by telephone to the out-of-state printer. Follow-up on the printing order is done by telephone, mail, and by contacts between the out-of-state printer and through its agents or representatives in the State of California. The contact in the State of California is for the purpose of obtaining the advertising copy that will be used by the out-of-state printer in printing the circulars. Some of such copy might consist of paste-ups, type-setting or other preparation done in the State of California by the agent of the out-of-state printer. “The California business will never take delivery of all the advertising circulars. The circulars will be mailed to potential customers of the California or they will be delivered to common carriers for delivery to stores as store copies and to publications that may be located in the State of California for inserting in such publications. The copies to be delivered as store copies will be a small residue of less than one percent of the total printing.

Mr. A--- M. G---

-2-

June 15, 1982
325.0001

“Both the mailing of the circulars to any California residents and the delivery of the circulars to carrier or Post Office will be completed outside of the State of California. The source of the mailing list may be from a computer tape prepared by the California agent of the out-of-state printer. Based on these facts, particularly the fact that the California purchaser included an explicit provision in its purchase order that title to the printed advertising circulars would pass to the purchaser at the out-of-state printer’s location when the printing order was completed, we agree with your conclusion that the transaction would not be subject to sales tax because the sale took place outside California. This conclusion is supported by Regulation 1620(a)(1), as you note. As further explained in Regulation 1620(b), however, use tax applies with respect to any property purchased for storage, use, or other consumption and stored, used, or consumed in this state. For this reason, we believe that the circulars shipped to the customer’s California stores for use as store copies would be subject to use tax. We assume that the circulars shipped to publications would be inserted into newspapers or periodicals which are exempt under Revenue and Taxation Code Section 6362. Such circulars would also enjoy that exemption under Regulation 1590(a)(3) and would not be subject to use tax. Circulars mailed by the out-of-state printer to addresses in California would also not be subject to use tax because we regard the mailing as an out-of-state use. Thus, only the charges allocable to the store copies would be subject to use tax. While liability for use tax falls on the purchaser, the out-of-state printer is required to collect the tax and pay it to the Board. (Revenue and Taxation Code Sections 6202, 6203 and 6204.) The printer has an agent here and would be considered a “retailer engaged in business in this state” as that term is defined in Section 6203. Since the use tax required to be collected is a debt owed by the retailer to the state, the printer will incur a tax liability under the described facts for the store copies. Very truly yours,

Richard Ochsner
Tax Counsel

RHO:sw