Ezel / Tax Rulings / CA

Were royalties paid by California's education agency for licensed film negatives or positives used to produce textbooks taxable?

Short answer Yes under the 1969 position. The film license was taxable, measured by the total royalty the education agency paid to use the material.
State
CA
Ruling
Annotation 330.2260
Tax type
Sales and Use Tax
Issued
1969-12-12
Issued by
California State Board of Equalization
Requested by
Unidentified company assessed for licensing film negatives/positives to the California Board of Education
Topics
textbooks dies leases licenses royalty use tax notice of determination department determination
Source
View Original PDF

Apply this to your situation

This page answers the general question as of 1969. Ask about yours and see what current California tax law says, with citations.

Currency note: this ruling is from 1969
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This December 12, 1969 letter records the Board's position after SB 366 failed in committee; it is not evidence of current law. The PDF omits the licenses/materials, royalty records, company determination, bill/hearing record, June 16 agency notice, proposed Department determination, tax bill/reply and final outcome. It names the `California Board of Education` as licensee but later the `Department of Education`, unresolved here. Its use-tax/payment sentence repeats `is a use tax` and lacks a verb before the Department; this defect is preserved, while the recommendation/billing request is reported separately. Another taxpayer cannot rely on it and should verify the parties, media/rights, royalty, exemptions and current law.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Plain-English summary

An unidentified company received a notice of determination involving film negatives/positives licensed to the California Board of Education. The letter later calls the agency the Department of Education; it does not resolve the naming difference or supply the license, notice, period or amount.

Senate Bill 366 would have excluded leases, licenses or hires of letter plates, dies or film material to the Department for textbook production from sale. It failed at a May 28, 1969 Senate Revenue and Taxation Committee hearing. The Board then notified the Department on June 16 that tax would be asserted on total royalty paid to use dies, films or plates.

That led to the company's determination. The source calls the tax a use-tax liability, but its next clause is defective: the tax is a use tax is a use tax liability and the payment is ultimately the Department of Education. The letter separately says the Board later recommended a determination against the Department, asked the company to bill the Department for tax and send the Department's reply.

No bill record, license, royalties, notice, bill/reply or final payment/appeal outcome is supplied, and the letter cites no statute/regulation. The live annotation states only that the film lease was taxable and royalty was the measure.

Common questions

Was the license treated differently from a lease?

No. The film-material license remained taxable under the stated historical law.

What was the measure of tax?

The total royalty paid for use of the film negatives or positives.

Did the proposed textbook-production exclusion pass?

Not in the legislative episode described by the letter; Senate Bill 366 failed in committee.

Did the letter clearly state who owed the use tax?

Its sentence is grammatically defective, but it reports a recommendation to determine the Department and directs the licensor to bill the Department and send its reply.

Was a Department determination actually issued?

The letter says one was recommended; it supplies no resulting notice or outcome.

Are the license and royalties supplied?

No. The source gives neither agreement, film-rights terms, invoices, royalty amount nor payment records.

Citations and references

  • Senate Bill 366 and May 28, 1969 committee hearing — described failed exclusion; records absent
  • June 16, 1969 Department notice — total-royalty position described; copy absent
  • Company notice of determination and later Department determination recommendation — copies/outcomes absent
  • December 12, 1969 Rigby letter — billing/reply request with no numbered statute/regulation
  • Film licenses/materials, royalty/tax billing/payment and final disposition records — absent
  • Official Annotation 330.2260 — taxable-lease/royalty result without legislative/procedural/source branches

Source

Original ruling text

330.2260

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

December 12, 1969

Gentlemen:
This letter is written in regard to the notice of determination issued against your company involving your licensing of film negatives and/or positives to the California Board of Education. As you are no doubt aware, Senate Bill 366 was introduced with the purpose of excluding from the definition of a sale the lease, license, or hire of letter plates, dies, or film material to the Department of Education for the production of textbooks. On May 28, 1969, this bill was heard by the Senate Revenue and Taxation Committee, but failed to pass. As a result of the failure to pass, we notified the Department of Education on June 16, 1969, that we would have no alternative but to assert tax on the total royalty paid by the Department of Education for the use of those dies, films, or letter plates. The end result was the issuance of your notice of determination. However, since the tax is a use tax is a use tax liability and the payment is ultimately the Department of Education, it was also our latter recommendation that a determination also be issued against the Department of Education. In order that we can be certain of the Department of Education’s official position regarding payment, we would appreciate it if you would bill the Department of Education for the tax owing and send us a copy of their reply. Your expeditious handling of this matter would be appreciated.

Very truly yours,

Glenn L. Rigby
Tax Counsel
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