Were Nintendo, Sega, software, and audio-tape rentals subject to the special rule that always taxed video-cassette rental receipts?

Plain-English summary

The attached June 15, 1990 district letter said historical Regulation 1660 treated videocassettes, videotapes and videodiscs differently: rent remained taxable even if purchase-price tax was paid, so lessor had no option.

Audio tapes, Nintendo, Sega and/or software were outside that category and fell under general tangible-personal-property lease rules. The unreproduced May 18 request and regulation enclosure leave the products, agreement and exact regulatory text unseen.

For same-form property, lessor could elect purchase-price tax when acquiring it or timely report that tax on the return for the period first leased. A timely election meant no tax on subsequent rental receipts; without one, rent was taxable. The source does not apply that framework to a proved transaction.

The May 14, 1996 Gary Jugum memorandum says Legal Division agreed with the conclusion of a June 15, 1990 D. F. Brady memorandum, but the PDF's attached June 15 letter is signed by District Administrator Jack Najarian and does not name Brady. The relationship is unresolved. Live 330.2376 reports June 15, 1990 and July 10, 1996, conflicting with the PDF's May 14 confirmation date.

Common questions

Were Nintendo and Sega rentals treated like movie-video rentals?

No. The source expressly distinguished them.

Could the lessor pay tax on cost?

Yes, for property leased in the same form as acquired, if the election was timely.

What happened without a timely election?

Rental receipts were taxable.

When was the historical election timely?

The 1990 letter says lessor could pay at acquisition or report purchase-price tax with the return for the period in which property was first leased.

Did the source decide tax for an identified rental business?

No. It states classification guidance, but the request, products, contract, acquisition records, tax payments and returns are absent.

Who wrote the 1990 opinion?

The attached letter is signed by Jack A. Najarian. The 1996 memo instead says it reviewed a D. F. Brady memorandum dated the same day; the PDF does not explain whether they are different documents.

Which 1996 date does the record establish?

The PDF says May 14, 1996. Live Annotation 330.2376 says July 10, 1996. Neither source explains the conflict, so this page preserves both.

May a current game or software lessor rely on it?

No. It is historical internal guidance, not a taxpayer-specific final ruling, and product/media categories and law may have changed.

Citations and references

• Regulation 1660(b)(1)(A) — historical special rent-tax rule for video cassettes/tapes/discs
• Regulation 1660(c)(2) — general same-form election between cost and rent
• May 18 request and Regulation 1660 enclosure — described but absent
• June 15, 1990 Najarian letter — classification and election mechanics
• Same-day D. F. Brady memorandum — referenced by Jugum but not independently reproduced/identified
• May 14, 1996 Jugum memorandum — agreement with Brady's stated conclusion
• Live 330.2376 — unexplained July 10, 1996 date conflict

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 330.2376
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/330-2376.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Mr. Glenn Bystrom

From:

Gary Jugum

Subject:

Non-Attorney Opinions

330.2376

Date:

May 14, 1996 and 6/15/90

I have reviewed D. F. Brady's memorandum of June 15, 1990 to --- --- --We are in agreement with his conclusion, as follows: Regulation 1660 Nintendos and Segas. Leases of Nintendos and Segas and/or software were not within the exemptions for video cassettes, video tapes and video discs provided by Regulation 1660(b)(1)(A). There lease fall under the general leases of tangible personal property. If leased in the same form as acquired, tax is due on the rental receipts or the purchase price of the property as set forth under section (c)(2) of the above regulation. 6/15/90

330.2376

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

*note: Nintendos etc. not same as movie rentals

June 15, 1990
Dear Mr.
This is in response to your letter of May 18, 1990, in which you ask whether audio tapes, Nintendos, Segas, and/or software are considered in the same category as “videocassettes, videotapes, and videodiscs for purposes of sales and use taxes." As you know, Regulation 1660 (copy enclosed) has provisions for videotapes, discs, and cassettes which treat them in a different manner than other types of leased property. These provisions state that tax applies to rental receipts regardless of whether such property is acquired with tax paid on the purchase price. Therefore, there is no option available to lessors of videotapes, discs, and cassettes. Audio tapes, Nintendos, Segas, and/or software, however, do not come under these special provisions since they are not in the same category. Leases of audio tapes, Nintendos, Segas,.and/or software fall under the general provisions of leases of tangible personal property. Therefore, the lessor of such property leased in the same form as acquired has an option to pay tax on rental receipts or to pay tax on the purchase of the property. Under this option, the lessor may elect to pay tax on the purchase price when acquiring it, or to report tax on the purchase price timely with the sales and use tax return for the period in which the property is first leased. If the election is not made timely, tax is due measured by rental receipts. On the other hand, if a timely election is made to payor report tax on the purchase price, no tax is due on the subsequent rental receipts. I hope this information is helpful. If you have any questions please let me know.

Sincerely,

Jack A. Najarian
District Adminitrator

JAN:tb
Enclosure