Were annual directory subscription payments taxable when the publisher bought each printed book tax-paid, retained title, and required return?

Plain-English summary

An unnamed publisher's directory compiled San Francisco real-estate owners. First published in 1951 and issued continuously, it was used by many businesses, principally real-estate brokers and salespeople. The publisher completely reprinted it each year, delivered the new edition in January and picked up the prior year's copy.

The subscriber agreement called the transaction a lease, kept the book as publisher property and barred lending, selling, reprinting, publishing or copying. A subscriber also could not knowingly permit use beyond its own employees, tenant brokers or other office associates at its place of business. It had to return the book when receiving the next edition or when the agreement ended.

The publisher bought printing and every other book component from a printer with sales-tax reimbursement, then supplied the completed book in exactly the same form. Assuming the described agreement terms were followed and enforced, counsel treated subscriber rent as exempt from sales/use tax under former Ruling 70(c)(2)(F).

The publisher also had a similar agreement with a redacted association, identified in the conclusion as MLS, allowing member subleases under the same terms. Counsel extended the treatment to those subleases under former Ruling 70(c)(2)(H).

Neither agreement, the printer records nor any implementation evidence appears in the PDF. The official retyped document also visibly prints and', 6hall, 1s, Bold and tax paid end; these source defects remain in the verbatim text.

The live annotation publishes the annual reprint/return and direct subscriber result. It omits the MLS member-sublease holding, detailed user/copy restrictions, explicit follow-and-enforce condition and missing records.

Common questions

Did the publisher sell the annual directories?

No under the enforced agreement; it retained title and required return.

What did the subscriber restrictions cover?

Title, return, lending, selling, reprinting, publishing, copying and use only by specified office associates at the subscriber's workplace.

Had the publisher paid tax on the books?

Yes, including printing and all other components purchased from the printer.

Were the books changed before delivery?

No. They were supplied in exactly the same form as acquired.

Did the conclusion depend on actual enforcement?

Yes. Counsel expressly assumed the described terms were followed and enforced.

Did the treatment extend to subleases?

Yes under the described association arrangement and equivalent restrictions.

Were the subscriber and MLS agreements published?

No. They are described, but neither complete agreement is supplied.

Was printer tax proof supplied?

No. The letter reports tax reimbursement on all components, but no contract, invoice or payment record appears.

Does the source show a completed dispute or tax outcome?

No. It gives conditional advice without subscriber payments, returns, audit, assessment, claim or appeal.

Citations and references

• Former Ruling 70(c)(2)(F) — tax-paid, same-form rental treatment; complete ruling absent
• Former Ruling 70(c)(2)(H) — MLS member-sublease treatment; complete ruling absent
• November 1, 1968 request — referenced but not reproduced
• Subscriber and publisher–association/MLS agreements — described but not supplied
• Printer contract/invoices/tax proof — described but not supplied
• November 13, 1968 counsel letter — conditional direct/sublease result with no implemented outcome
• Official Annotation 330.1908 — publishes only the direct-subscriber result without the enforcement/source limits

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 330.1908
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/330-1908.pdf

Original ruling text

330.1908

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

November 13, 1968

Gentlemen:
This is in reply to your letter of November 1, 1968, asking for our opinion as to whether sales tax applies to the furnishing of a --- ---. We understand that the --- --- --- is a compilation of the owners of real estate in San Francisco. It was first published in 1951 and' has been published continuously since that time. It is used by many types of businesses but primarily by real estate brokers and their salesmen. Each year the book is completely reprinted to keep the information updated and of value to its subscribers. During the month of January the new edition for the current year is delivered and the previous year's edition is picked up. The agreement with each subscriber provides that the transaction is a lease; that the book remains the property of the publisher; that the subscriber 6hall not lend, sell, reprint, publish or copy the book or knowingly permit the use of the book by any person other than his own employees, tenant brokers or other office associates, at the subscriber's place of business; and that the subscriber shall return the book upon receipt of each subsequent edition or upon termination of the agreement. The publisher has entered into a similar agreement with --- --- --- --- --- --permitting --- to sublease the book to its members under the terms described above. The publisher contracts with a printer to print the book. The book is supplied by the publisher to subscribers in exactly the same form as the book 1s in when Bold by the printer to the publisher. The publisher pays sales tax reimbursement to the printer on all of the components of the book, including but not limited to the printing. You ask whether the payments by the subscribers are subject to tax. Based on the foregoing facts, and assuming that the terms of the agreements described herein are followed and enforced, the payments by subscribers are exempt from sales or use tax in accordance with ruling 70(c)(2)(F) as rental payments for property

acquired tax paid end leased in substantially the same form as acquired. The exemption extends to the subleases by MLS in accordance with ruling 70(c)(2)(H).

Very truly yours,

T. P. Putnam
Tax Counsel

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