When were an advertising agency's printed mailers sent to out-of-state addresses exempt from California sales tax?

Plain-English summary

A redacted advertising agency's April 13, 1983 letter said it printed letters and mailers and sent them directly to individual addresses. It asked whether tax applied to charges for printed material mailed outside California. The request, customer contracts, printed pieces, addresses, charges, invoices and mailing records are absent.

Section 6396, as quoted, exempted gross receipts when the sales contract required outside shipment and the retailer shipped through its own facilities or delivered to a carrier, customs broker or forwarding agent for that shipment. It defined a carrier as a compensated transporter of other people's tangible property, including common and contract carriers, and a forwarding agent as a business preparing or arranging property for shipment.

If the agency contracted to sell the printed pieces to its customer, the customer required shipment or mailing to outside addresses, and the agency actually mailed them there, counsel said tax did not apply to the agency's charge. The agency could give an outside printer a resale certificate and then make its own qualifying outside sale. No contract, certificate or shipment is reproduced.

The agency had stated its belief that an outside printer's charge was taxable whether or not the mailers later went outside California. Counsel narrowed that result: if an agency agreement made the advertising agency the customer's purchasing agent, the printer made a California retail sale to the customer, so the printer's charge was taxable even when the agency later mailed the material outside.

The letter identifies no completed sale, contract, agency agreement, printer, certificate, mailing, tax amount or later result. The live annotation preserves the seller-versus-agent distinction and June 1 date but omits the request and taxpayer-belief provenance, statutory definitions, resale-certificate direction, missing evidence and conditional posture.

Common questions

When was the advertising agency's charge exempt?

When its customer contract required outside shipment or mailing and the agency actually sent the pieces to the out-of-state addresses.

Could the agency give its printer a resale certificate?

Yes, if the agency bought for its own resale to the customer under the qualifying outside-mailing arrangement described by counsel.

When was the outside printer's charge taxable?

When the agency agreement made the advertising agency the customer's purchasing agent, because the printer then made a California retail sale.

Did later out-of-state mailing cure that California retail sale?

No. Counsel said the printer's charge remained taxable under that purchasing-agent arrangement.

Did the opinion decide a particular mailing or invoice?

No. It supplies no contract, agency agreement, certificate, address list, invoice, mailing proof, tax amount or later outcome.

Citations and references

• Revenue and Taxation Code section 6396 — quoted outside-shipment exemption and carrier/forwarding-agent definitions
• April 13 request and transaction documents — described but not reproduced
• Official Annotation 325.0611 — publishes the two role-dependent rules while omitting material provenance and limits

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 325.0611
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/325-0611.pdf

Original ruling text

325.0611

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

June 1, 1983

This is in reply to your April 13, 1983 letter regarding the application of sales tax to the printed material you send to out-of-state addresses. We understand that --- is an advertising agency which prints letters and mailers and directly mails the letters and mailers to individual addresses. You asked whether tax applies to the charge for the printed material which you mail outside of California. Section 6396, Revenue and Taxation Code, provides: "There are exempted from the computation of the amount of the sales tax the gross receipts from the sale of tangible personal property which, pursuant to the contract of sale, is required to be shipped and is shipped to a point outside this state by the retailer by means of: (a) facilities operated by the retailer, or (b) delivery by the retailer to a carrier, customs broker or forwarding agent, whether hired by the purchaser or not, for shipment to such out-of-state point. For purposes of this section, the term 'carrier' shall mean a person or firm engaged in the business of transporting for compensation tangible personal property owned by other persons, and includes both common and contract carriers. The term 'forwarding agent' shall mean a person or firm engaged in the business of preparing property for shipment or arranging for its shipment" If your contract with your customer requires you to ship or mail the mailers to addresses outside California and you mail the mailers to the out-of-state addresses, tax does not apply to your charge for such mailers. You believe that if you contract with an outside printer to print the mailers, tax applies to the charge whether or not you mail the mailers out of state. You may issue a resale certificate to an outside printer, and your sale to the customer would not be taxable if, pursuant to your contract with the customer, you are required to ship or mail the mailers outside the state and you do so mail the mailers outside the state.

On the other hand, if you have an agency agreement with your customer whereby you purchase the printing as an agent for your customer, tax applies to the printer's charge. The printer would be making a retail sale of the printing in California. This is true whether or not you subsequently mailed the printed material out of state. We hope this answers your questions; however, if you need further information, feel free to write again.

Very truly yours,

R. L. Dick
Tax Counsel

RLD: jw