Did use tax apply when an out-of-state printer sent direct-mail packages by common carrier to a California post office for immediate mailing to addressees?

Plain-English summary

An organization bought printed direct-mail packages and mailing services from an out-of-state vendor. Some packages entered the mail outside California; others were carried from outside the state to a California post office and then mailed directly to addressees.

Neither route created California use by the buyer. For the California-post-office route, the seller had to direct the out-of-state carrier to deliver straight to the post office, not to the buyer or a California representative such as a mailing house. The sales agreement also could not pass title to the buyer in California.

On those facts, the common carrier and post office were not the buyer's California agents. The printed matter began a continuous interstate journey when the seller delivered it to the carrier outside California, and the buyer never held title or exercised ownership power over it here.

The audit covered invoices from 1981 through 1983. The auditor reported separate freight or air-freight charges to California post offices in 1981 and 1982 but none in 1983, and separately charged materials, letter generation, mailing, consulting, and list-rental items. Counsel's no-use conclusion covered the printed packages and related printing charges on the assumed direct-delivery routes; the memorandum supplies no final audit calculation.

The June 4 request, attached purchase order and invoices, contracts, full title and delivery terms, carrier and postal evidence, amounts, completed audit, assessment, and later outcome are absent. The live annotation states the continuous-interstate-journey conclusion but omits the audit context, years, charge facts, title and delivery assumptions, statutory authority, and missing records.

Common questions

Did it matter whether the packages entered the mail in Massachusetts or California?

Not on the stated facts. Counsel found no California use when the seller mailed the packages from Massachusetts and reached the same result when the seller delivered them to an out-of-state common carrier for direct redelivery to a California post office.

Why were the California post office and carrier not treated as purchaser agents?

The assumed route gave the packages directly from the seller to the carrier and then the post office, without delivery to the purchaser or a California representative such as a mailing house. Counsel therefore treated the shipment as a continuous interstate journey rather than purchaser possession in California.

What title term was important?

The conclusion assumed no invoice or other sales agreement passed title to the purchaser in California. Counsel said none of the sample invoices attached to the auditor's request contained such a term, but those invoices are not reproduced in the official PDF.

What purchases did the audit describe?

The auditor listed consulting, direct-mail packages, renewal notices, added-gift appeals, paper, envelopes, letter generation, mailing services, list rental, freight, and air freight. The source supplies no purchase order, invoice, price, quantity, mailing list, or allocation applying tax to individual lines.

Was the audit finally resolved?

The source is an internal legal response during an audit. It provides no completed audit report, tax computation, assessment, refund or claim, appeal, Board action, or later outcome.

Citations and references

• California Revenue and Taxation Code section 6009 — partly quoted and applied to California use through ownership power; complete authority, definitions, exceptions, procedures, amendments, later history, and current law not supplied
• June 4 audit request, attached purchase order and invoices, and August 24 legal memorandum — no underlying request or attachments, transaction records, completed audit, tax computation, assessment, claim, appeal, or later outcome supplied
• Official Annotation 325.0011's historical conclusion and date — omits the audit provenance, years, charge facts, assumptions, authority, attachments, 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/325-0011.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

--- --- – Auditing (JEJ)

From:

Headquarters – Legal
John Abbott, Tax Counsel

Subject:

Z--- S--- of S--- D--SR -- XX-XXXXXX; SR -- XX XXXXXX
Out-of-state printing and mailing

325.0011

Date:

August 24, 1984

This is in reply to your memorandum to Legal dated June 4, 1984. You state: An audit in process of the S--- D--- Z--- has disclosed that it has purchased consulting, direct mail packages, renewal notices, added gift appeals, etc. from E--- D--- M--- located in ---, Mass. (See P.O. attached). The out-of-state firm provides materials, (paper and envelopes) letter generation and mailing services for these packages for which it makes separate charges. (See copy of invoice attached). Some vendor’s invoices in 1981 and 1982 also have a separate charge for freight and air freight to [California] post offices. There were no separate freight charges in 1983. The controller explained that in most cases the letters and packages are mailed direct from out of state. The freight charge would be the cost for freight from vendor’s place of business to a post office in ---, Mass. In some cases, however, the packages are shipped to the [California] post office by air freight and mailed from a local post office. Auditor has determined that where the packages are mailed directly from out of state the charges for materials and letter generation would not be subject to use tax. However, where the packages are shipped from [---], CA, the charges for materials including letter generation and list rental on services other than mailing services would be subject to use tax. Please advise if our interpretation on the tax application to these purchases of materials for these items is correct.

Z--- S--- of S--- D---

-2-

August 24, 1984
325.0011

Our conclusion is that use tax does not apply when the direct mail packages and other printed matter is mailed to California addresses either from a Massachusetts post office, or from a
[California] post office. This assumes that the seller (E--- D--- M---) has directed the carrier to deliver the printed matter directly to the [California] post office for mailing, and not to the taxpayer or a California representative or agent of the taxpayer (such as a mailing house) for subsequent delivery to the [California] post office for mailing. This also assumes that the invoices or other agreements related to the sale did not provide that title to the printed matter would pass to the taxpayer in California. (None of the sample invoices attached to your memo contain such a title provision). You correctly point out that use tax does not apply to sales of printed matter when the sale occurs out of state and the taxpayer instructs the seller to deposit the printed matter in the mails at an out-of-state location addressed to California addressees. In this situation the “use” of the printed matter by the taxpayer does not occur in this state, under the statutory definition of “use” in Revenue and Taxation Code section 6009 (“the exercise of any right or power over tangible personal property incident to the ownership of that property….”). We also conclude this same rationale means that the taxpayer makes no “use” of the property in California when the taxpayer, as here, instructs the out-of-state seller to mail the printed matter from a California post office by delivering the printed matter to a common carrier out of state for redelivery to the California post office. Neither the carrier nor the post office can be said to be California agents or representatives of the taxpayer. The printed matter therefore began a continuous journey in interstate commerce when the seller delivered the printed matter to the carrier at an out-of-state location. The taxpayer never had title to the printed matter in California and, therefore, could not pass title (use) the printed matter in California.

JA:ss