Were a printer's booklet charges exempt when the printer delivered to the buyer's mailing service, which later mailed many booklets out of state?

Plain-English summary

An attorney's September 29 letter asked about a local printer's charges. A mail-order house ordered advertising booklets; the printer delivered the finished booklets to the attorney's mailing-concern client; and that client used a mailing list previously supplied by the mail-order house. Many booklets were to be mailed outside California. The request, print order, list, charges and mailing records are absent.

Associate tax counsel concluded that all printer charges were taxable, including charges attributable to booklets later mailed outside California. Delivery to the mailing concern was local delivery to the buyer's agent, passed title to tangible personal property to a purchaser in California and completed the printer's contract before the property entered interstate commerce.

Ruling 55 A-1-(c)-(3), as described in the letter, used “forwarding agent” for freight handlers that received property from various customers and consolidated it for shipment. The mailing concern did not qualify: the printer delivered on the mail-order house's instructions, and the mailer received the booklets under its own contract with that buyer to stuff and mail them. The full ruling and contracts are absent.

The letter said billing the mail-order house directly or billing the printer, which then billed the buyer, did not change taxability. It reserved a different result if the mailing concern instead was a subcontractor responsible to the printer. No contract, invoice or other record establishes whether that alternative applied.

Counsel reported finding no federal case treating manufacturer delivery to the buyer's agent for further handling as an interstate sale merely because the agent later shipped outside. The letter distinguished Michigan-Wisconsin Pipe Line Co. v. Calvert, 347 U.S. 157: that case addressed taxing gas gathering when gathering was the first step in interstate transmission, while the California event here occurred before the booklets entered interstate commerce. It also said Ruling 55 A-1-(f) concerned the broader exemption for foreign commerce and was not pertinent.

The live annotation preserves the buyer-agent delivery and tax conclusion despite later outside mailing. It omits the mailing-list and contract provenance, title analysis, freight-consolidator definition, billing and subcontractor alternative, federal-case distinction, foreign-commerce point, missing records and lack of a later applied outcome.

Common questions

Why did later out-of-state mailing not exempt the printer's sale?

The printer had already delivered the booklets in California to the buyer's agent and fulfilled its contract before the mailing concern placed them into interstate commerce.

Was the mailing concern a forwarding agent under the cited rule?

No on the described facts. Counsel distinguished freight handlers that received goods from various customers and consolidated them for shipment from a mailer working under its own stuffing-and-mailing contract with this buyer.

Did routing the mailer's bill through the printer change the result?

No by itself. The letter focused on the parties' agency and contract roles rather than the billing route.

What subcontractor fact could have changed the analysis?

Counsel reserved the situation in which the mailing concern was a subcontractor responsible to the printer. The source supplies no agreement or other evidence resolving that possibility.

Did the cited U.S. Supreme Court pipeline case control?

No according to counsel. The pipeline case involved a taxed gas-gathering step that began interstate transmission; here the printer's taxable delivery occurred before interstate mailing.

Does the source provide an invoice or assessed tax amount?

No. It supplies no charges, quantities, invoices, tax measure, return, assessment, payment or later proceeding.

Citations and references

• California Sales and Use Tax Ruling 55 A-1-(c)-(3) and A-1-(f) — cited for forwarding-agent and foreign-commerce rules; complete ruling, replacement history and current law not supplied
• Federal Constitution Commerce Clause and Michigan-Wisconsin Pipe Line Co. v. Calvert, 347 U.S. 157 — discussed and distinguished; full authorities and later treatment absent
• September 29 request, print order, buyer-mailer contract, billing and mailing records — described but not reproduced; charges and transaction evidence remain absent
• October 30 response — taxes all printer charges on stated agency facts while reserving the printer-subcontractor alternative; no applied measure or later result supplied
• Official Annotation 325.0520 — preserves local buyer-agent delivery but omits the ruling, contract, billing, case, evidence and procedural limits

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.0520
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-0520.pdf

Original ruling text

325.0520

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

October 30, 1956

Mr. J--- C. S--Attorney at Law
XXX --- --- --- Boulevard
--- --- XX, California
Dear Mr. S---:
In your letter of September 29 you requested a ruling on the applicability of the sales tax to charges made by a printer on the following facts:

1. a mail order house places an order with a local printer for the printing of advertising
   booklets;
2. the finished booklets are delivered to your client, a mailing concern, for mailing in
   accordance with a mailing list previously provided by the mail order house;
3. many of the booklets are to be mailed out-of-state.
   It is our opinion that all of the printer’s charges, including the charges for booklets which are to be ultimately mailed out-of-state, are subject to sales tax. The delivery of the booklets to your client constitutes a local delivery to an agent of the buyer which results in the passage of title to tangible personal property to a purchaser in this State. We do not believe that the mailing concern qualifies as a forwarding agent under Ruling 55 A-1-(c)-(3). This section refers to handlers of freight who receive property from various customers and consolidate them for shipment. The printer delivered the property to the mailing concern on the instructions of the mail order house and thereby fulfilled his contract. The mailing concern received the property as the agent of the mail order house in accordance with a contract with said mail order house to stuff and mail said property. Whether your client bills the printer who in turn bills the mail order house or the mail order house is billed direct will not affect a change in the taxability of this transfer of title unless the mailing concern is a subcontractor responsible to the printer.

Mr. J--- C. S---

-2-

October 30, 1956
325.0520

We are aware of no federal cases which have gone so far as to hold that when manufactured property is forwarded to an agent of the buyer’s for further handling and then shipped by the agent to an out-of-state point that the sale by the manufacturer would be considered to have occurred in interstate commerce. Upon reading the case of Michigan-Wisconsin Pipe Line v. Calvert, 347 U. S. 157, we do not feel that the incident which was being taxed is analogous to the incident here involved. In that case the State of Texas attempted to impose a tax on the privilege of gathering gas. The court did not say that the privilege could not be subjected to taxation but only that when the gathering of gas was the first step in the interstate transmission would the tax violate the Commerce Clause of the Constitution. To make our situation come within that case it would be necessary to find that the tax was imposed on a carrier for accepting property which he is to transport in interstate commerce. Such is not the case. In conclusion it is our opinion that the sale is complete when the booklets are delivered to the mailing concern. The taxable event has occurred prior to the entrance of the property into interstate commerce. We would like to point out that Ruling 55, paragraph A-1-(f), is not pertinent since it relates to foreign commerce which commerce is afforded a broader exemption from local tax than is interstate commerce. If we may be of further assistance, please advise. Very truly yours,

Bill Holden
Associate Tax Counsel

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Los Angeles – Compliance