Was a music library's temporary delivery of recorded tapes for copying a taxable lease even when the customer paid for a license to use the music?

Plain-English summary

The official PDF combines a February 17, 2005 internal annotation-review email with the actual November 12, 1974 opinion. Under the source-body date rule, the ruling's issued date is 1974; the later email did not create a new ruling.

An absent November 24, 1965 letter had found music-license charges nontaxable in two situations. First, clients requisitioned recordings from a taped-music library; a sound laboratory copied music to client-furnished tapes, billed clients, and returned originals; the library then billed use licenses. Second, clients rented a large selection for a specified annual amount and paid another license charge if they used music.

Those views were published in tax-service digests then labeled BTLG 330.2200 and 527.0200. Inquiries from other taxpayers based on 527.0200 prompted reconsideration because the advice conflicted with other rights-to-use positions. The old letter/digest copy was identified as an enclosure but is not reproduced.

The 1974 opinion analogized to quoted Regulation 1502(f)(1). Temporary possession for direct use or customer recording was a tangible-property lease; total consideration included present/future license or royalty payments, whether minimum or extended. The stated regulation enclosure is also absent.

Both library structures were taxable leases when tapes passed to clients or laboratories at client direction. That result assumed the owner paid no tax or reimbursement on finished library tapes when acquired. License-use amounts entered taxable consideration, and laboratory copying charges were taxable too. The opinion directed the owner to follow this changed view for future transactions and said prior digests would be revised; it does not address past liability.

The 2005 email says current Annotations 330.2890 and 295.0365 are identical. It asks both to identify a music library and add a Regulation 1527(d) note, while only suggesting—Perhaps—that the rule was added after 1974. It quotes subdivision (d): library-producer rentals are taxed as rentals generally regardless of license label.

A fresh official fetch shows both live annotations remain identical but neither requested edit appears. Live 295.0365 has no backup link; its exact PDF path returned direct 404 and Sofya 4xx. The 1974 historical identifiers also drifted: current 330.2200 and its 1992 backup concern unrelated short-term equipment leases, while current 527 collection contains no 527.0200 and that exact backup path likewise failed both fetchers.

Live 330.2890 publishes the two taxable structures and lab-charge result but omits the prior-letter reversal, other-taxpayer inquiry trigger, prospective-only instruction, historical identifier drift, absent enclosures/evidence and unimplemented 2005 request.

No 1965 letter/digest, library tape, client/laboratory agreement, requisition/direction, customer media, copy/return, annual rent, license/royalty charge, finished-tape invoice/tax, Regulation 1502 enclosure, implementation, return, audit, assessment, claim, appeal or later outcome appears.

What this means for you

Preserve who possesses original media, who directs copying, where customer media comes from, return terms, every annual/license/royalty/laboratory charge and acquisition tax on finished recordings. Treat source date and historical annotation identifiers carefully; current numbers do not necessarily retrieve the material cited in 1974.

Common questions

Did customer-owned copy media avoid a lease?

No. Temporary possession of the library tape by the customer or a laboratory acting at the customer's direction was treated as a lease.

Were license fees outside the tax measure?

No. The letter included all license or royalty payments in the taxable consideration on these facts.

What if the library paid tax on finished tapes?

The stated conclusion was expressly conditioned on the library not having paid tax or tax reimbursement when it acquired those tapes.

Did the letter preserve the 1965 advice?

No. It told the taxpayer to follow the new view for future transactions and said the earlier published digests would be revised.

Did the 1974 letter decide past liability?

No. It instructed the owner about future transactions.

Was the 2005 requested edit implemented?

Not on the freshly fetched live 330.2890 or identical 295.0365.

Do historical 330.2200 and 527.0200 still retrieve the old advice?

No. Current 330.2200 is unrelated, and current 527 collection omits 527.0200.

Is Regulation 1527(d) proven to postdate 1974?

No. The 2005 writer only says it Perhaps was added later.

Citations and references

• Regulation 1502(f)(1) — historical temporary-possession/license-fee analogy; enclosure absent
• Regulation 1527(d) — library-producer rental rule quoted in 2005 email
• November 24, 1965 letter/digest copy — identified enclosure absent
• Historical 330.2200/527.0200 — current first is unrelated; current second absent
• Live 295.0365 — identical text; exact backup unavailable
• 2005 annotation-review request — requested changes remain absent live
• All tape/agreement/charge/acquisition-tax/outcome records — absent

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 330.2890
• Original supporting opinion and 2005 email: 330.2890 PDF
• Current identical entry: Annotation 295.0365
• Current unrelated identifier: Annotation 330.2200 and 330.2200 PDF
• Current 527 collection omitting historical 527.0200: 527 annotations
• Unavailable backup paths: 295.0365 PDF and 527.0200 PDF

Original ruling text

330.2890

Jarvis, Sharon
From:
Sent:
To:
Cc:
Subject:

Jarvis, Sharon
Thursday, February 17, 2005 10:15 AM
Rosenthal, Dave
Lyle, Geoff; Anderson, Vic
Annotations 330.2890 & 295.0365 (11/12/74)

These annotations are identical. They deal with charges for taped music obtained from a music library. The annotation should be amended so that the first sentence refers to the fact that a music library is involved, i.e., "An owner of a library of tape recorded music ...." Also, although neither the letter nor the annotation refers to Reg. 1527 Sound Recordings, the issue is covered in Reg. 1527(d) -"Tax applies to rentals of records and other tangible personal property by library producers in the same manner as it does to rentals generally whether designated as a license to use or otherwise." Perhaps this part of the regulation was added after the 1974 letter was written. In any event, a note should be added after the annotation referring to Reg. 1527(d).

330.2890

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

November 12, 1974

In a letter to you of November 24, 1965, we advised you that charges for a license to use music were not subject to sales or use tax in two situations: (1) where you make available to clients a library of tape recorded music, the clients requisition the tapes they wish to use, a sound laboratory transfers the music to tapes furnished by the clients and bills the clients accordingly, the original tapes are returned to you, and you then charge the clients for a license to use the music; and (2) where you rent a large selection of taped music to clients for a specified amount and then bill the clients for a license to use the music. The views expressed in our letter to you were digested and published in the various tax services. The digests presently appear in our Business Taxes Law Guide as annotations 330.2200 and 527.0200. A copy of the letter, showing the digests as previously numbered, is enclosed. Inquiries from other taxpayers based on the published annotation 527.0200 (1381.30 in the letter) have compelled us to reconsider the views expressed in our earlier letter. We have found that those views are inconsistent with our position in other, similar situations involving the taxability of, charges for rights to use property. In particular, they are inconsistent with section (f) (1) of Regulation 1502, which deals with the application of sales or use tax with respect to programs on magnetic tape for use in connection with automatic data processing equipment. That section of the regulation, a copy of which is enclosed, provides in part as follows: Tax applies whether title to the tape or other property upon which the program is coded, punched or otherwise recorded, passes to the customer, or the program is recorded on tape or other property furnished by the customer. The temporary transfer of possession of a program, for a consideration, for the purpose of direct use or to be recorded by the customer, is a lease of tangible personal property and the tax applies unless the property is leased in substantially the same form as acquired by the lessor and the lessor has paid sales tax reimbursement or use tax with respect to the property. Tax applies to the entire amount charged to the customer. Where the consideration consists of license fees or royalty parents, all license fees or royalty payments, present or future, whether for a period of minimum use or for extended periods, are includable in the measure of tax.

It is our view that in both of the situations described in the first paragraph of this letter, you are, by transferring possession of a tape to the client or to a sound laboratory at his direction, making a taxable lease of the tape, the taxable consideration for which includes the amounts he is to pay for a license to use the music, assuming that you did not pay tax or tax reimbursement on the cost of the finished tapes in your library when you acquire them. The sound laboratory is also subject to tax with respect to the charges made by it. You should be guided by this letter with respect to any future transactions of the kind in question. The published digests of the previous letter will be revised accordingly

Very truly yours,

T. P. Putnam
Assistant Chief Counsel

TPP: lb
Enclosures
bc: Hollywood - Dist. Admin.