When did laser printing and file work for restaurant birthday cards become taxable?

Plain-English summary

A business administered birthday clubs for restaurants. Customers registered on restaurant forms; the business entered their information on an eight-inch disk; a service bureau maintained each restaurant's customer file and produced a monthly tape; and another company used that tape to laser-print restaurant-supplied cards.

California drew the line at printing beyond the mailing name and address. If a card included an additional message, the business made a taxable sale of printed matter to the restaurant. The entire related file-maintenance service then became taxable as part of that sale—even if the message was brief and the laser printer charged nothing extra for it.

If the card carried only the name and address for mailing, the printing and related customer-file maintenance were nontaxable mailing services. Adding only a salutation such as “Dear __” did not make the addressing taxable.

Ownership, billing, and unresolved transfers

The requester said each restaurant owned its name file and the administrator could not use it without permission. The administrator billed the restaurant for each name entered and each card sent. The laser printer reportedly billed the administrator per addressed card at the same price with or without a message. The referenced customer arrangements, restaurant forms, invoice, sample card, bills, and accounting records are absent.

The letter also distinguished inside addressing. Printing a name and address inside a letter placed in a separately addressed envelope was taxable printing. Printing the address on the letter for actual mailing through a window envelope was nontaxable addressing. Counsel cited Business Taxes Law Guide Annotation 340.0040, whose supporting source is not included.

Counsel expressly declined to decide whether the administrator's disk transfer to the service bureau or the bureau's tape transfer to the printer was taxable. The requester had not asked, and the letter lacked enough facts. The live annotation preserves the message, address-only, salutation, and file-charge results but omits customer ownership and permission, billing details, inside-addressing guidance, unresolved media transfers, and missing enclosures.

Common questions

Did any additional message make the birthday card taxable?

Yes. Under this letter, brevity and the absence of an extra printer charge did not change the result.

Was a salutation enough to make address-only printing taxable?

No. A salutation alone did not take the work outside nontaxable addressing for mailing.

Were the disk and tape transfers also nontaxable?

The letter did not decide. It said the facts were insufficient and the requester had not asked about them.

Citations and references

• California Revenue and Taxation Code sections 6006(b) and 6012(b)(1)
• California Sales and Use Tax Regulations 1502(d) and (d)(3), 1504(b)-(c), 1540(c), and 1541(c)
• Business Taxes Law Guide Annotation 340.0040
• November 20, 1983 request, invoice, and postcard sample — referenced but not included
• Regulations 1502, 1504, and 1541 — referenced as enclosures but not included

Verbatim support

From the official March 1, 1984 letter:

This is so regardless of the brevity of the message, or the fact that the printer may charge nothing extra for printing the message.

If, on the other hand, the printer merely prints the names and addresses for mailing purposes only, on the cards you send for your customers, then this is a nontaxable service, and the services you render in maintaining customers’ address files are also nontaxable.

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/340-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/340-0070.pdf

Original ruling text

340.0070

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
(916) 445-3237

March 1, 1984

J--- G--President
B--- B--XXX --- -----, CA XXXXX
Re:

Birthday Business
Computer printed cards –
mailing services

Dear Mr. G---:
This is in response to your November 20, 1983 letter to the Board’s legal staff. You ask for our opinion on the application of sales tax to the following transactions: My company provides a service of administering Birthday Clubs for restaurants. Customers register in the restaurant on a form the restaurant provides. This form is sent to us and we enter the information onto a 8” disk which is sent to a service bureau where it is read into our customers file. Each month the service bureau prepares a tape with names and addresses of all customers whose birthday is during the following month. This tape is sent to another company which prints the information, on a card provided by our customer, using a laser printer and reading the tape provided by our service bureau. As can be seen from the enclosed invoice the laser printing company bills us for each card addressed and the charge is the same irrespective of whether they print merely the name and address or if they print an additional message on the enclosed card. We bill our customer for each name entered onto the disk and for each card we send for them. The name files belong to our customer and we cannot make any use of them without their permission. I have the following questions:

B--- B---

-2-

March 1, 1984
340.0070

1.
Is any part of the laser printing operation taxable to us? My reading of regulations 1504 (b)(1) and (2) and 1502(d)(3) indicates that this is not a taxable transaction. 2. Is any part of the service we perform for our clients taxable? Again, my reading of the regulations indicates that it is not. We set forth below the rules we think are applicable to the issues you raise. Sales and Use Tax Regulation 1502(d)(3) states in part: (3) Where the service bureau addresses, through the use of its automatic data processing equipment or otherwise, material to be mailed, with names and addresses furnished by the customer or maintained by the service bureau for the customer, tax does not apply to the charge for addressing. Regulation 1504(b), Mailing Services, provides in part: (1) Tax does not apply to charges for services rendered in preparing material for mailing, such as addressing…. (2) “Addressing” means the actual writing, typewriting, printing, imprinting or affixing of names and addresses or addresses only on property to be mailed. Regulation 1540(c), Printing Related to Mailing, states in part: (1) Tax applies to charges for printing matter furnished to a customer by a person engaged in the business of providing mailing services to the same extent as to charges for printed matter generally, even though the printed matter is to be mailed. Regulation 1541(c), Mailing, provides in part: Tax does not apply to charges for… addressing for the purpose of mailing (by hand or by mechanical means)… provided such charges are stated separately on invoices and in the accounting records. For purposes of the sales and use tax law, a “sale” includes the printing or imprinting of tangible personal property for consumers who furnish the materials used in the printing or imprinting. Revenue and Taxation Code section 6006(b). Further, the total amount of the sales price which must be included in the seller’s gross receipts subject to tax includes any services that are a part of the sale of tangible personal property. Code section 6012(b)(1).

B--- B---

-3-

March 1, 1984
340.0070

Applying these rules to your questions, our opinion is that the laser printing operation results in a taxable sale by your company to your customer when the printer not only prints the names and addresses on the cards for mailing purposes, but also prints an additional message on the cards you send for your customers. This is so regardless of the brevity of the message, or the fact that the printer may charge nothing extra for printing the message. While it is true that addressing for the purposes of mailing only, whether done by hand, by typewriter, or by computer, is regarded as a nontaxable service under Regulation 1504(b), any printing or imprinting beyond addressing for mailing is a taxable sale of the printed matter under Regulation 1504(c). Your services to your customers in maintaining their address files then becomes services taxable as a part of the sale of the printed matter. If, on the other hand, the printer merely prints the names and addresses for mailing purposes only, on the cards you send for your customers, then this is a nontaxable service, and the services you render in maintaining customers’ address files are also nontaxable. Please note that if the printer merely adds a salutation (Dear __) to the name and address, this alone would not make the addressing for mailing taxable. Although this does not apply to the postcard you enclosed as a sample, please note that nontaxable addressing for mailing does not include inside addressing, that is, the printing of names and addresses on letters which will be placed inside envelopes also bearing the recipient’s name and address. This is taxable printing of the inside addresses. On the other hand, if the names and addresses printed on letters are used for mailing purposes, such as when window envelopes are used to mail the letters, then the printing of the names and addresses on the letters is considered nontaxable addressing for mailing. Business Taxes Law Guide Annotation 340.0040. We note that there may or may not be other taxable transactions in the facts you relate, such as your transfer of the disc of names and addresses to the service bureau, and the service bureau’s transfer of the tape of names and addresses to the printer. We do not have enough facts in your letter to determine the taxability of these transactions, nor did you ask about them. For your general reference, see Regulation 1502(d), Manipulation of Customer-Furnished Information as Sales or Service. Please feel free to contact me if you have any further questions or comments about this letter. I enclose copies of Regulations 1502, 1504, and 1541 for your information. Very truly yours,

John Abbott
Tax Counsel
JA:ss
Enclosures