Did a customer's later reorder of a similar mailing-label list destroy one-time-use treatment for either separately licensed transaction?

Plain-English summary

The June 28, 1991 letter answered a June 10 request received by the Board on June 25. The requester's mailing-services subsidiary was under audit, and the auditor agreed that an opinion would help resolve one issue.

The subsidiary sold mailing labels under contracts whose paragraph 3 said pressure-sensitive or Cheshire mailing records could be used once and could not be duplicated in whole or part.

An auditor saw “Duplicate” or “Reuse” on some invoices. The seller explained that a later order used similar selection parameters—such as doctors in the Sacramento area—but did not give the customer a right to use any supplied names more than once.

California agreed that a later license to the same customer did not necessarily destroy one-time-use treatment for either transaction. Each agreement had to receive its own effect unless the separate licenses were an artifice to evade tax, which the opinion said was not the case.

The opinion said the lists were dynamic and changed from transaction to transaction, supporting the separate character of each agreement. The live annotation describes those changes as additions or deletions. The opinion concluded that the transactions in question were nontaxable.

Source and publication limits

The PDF quotes one contract sentence and describes invoice labels and the requester's example, but it does not reproduce the June 10 request, complete contracts, invoices, lists, customer transactions, or audit evidence. It provides no audit period, sampled transaction, proposed measure, tax amount, assessment, payment, appeal, or later outcome.

The opinion prints the cited rule as “Regulation 15034(a)(3).” Its quoted operative language and the live annotation identify Regulation 1504's one-time-use rule, so this page records the typo rather than silently changing the source tail. The live annotation preserves only the later reorder, separate agreements, dynamic-list changes, and continuing one-use treatment. It omits the audit and request provenance, contract text, duplication ban, invoice labels, selection example, artifice limitation, regulation-number typo, and missing records.

What this means for you

Mailing-list and label sellers

Use separate agreements that expressly limit each transferred list to one use and prohibit duplication, and retain evidence of list changes between orders.

Accountants and tax professionals

Review the legal rights in each license rather than relying on invoice labels such as “reuse,” while testing whether repeated agreements have genuine separate substance.

Common questions

Did a later reorder automatically make the first transfer taxable?

No.

Why were the licenses treated separately?

Each contract allowed one use, and the dynamic list changed between transactions.

What could defeat the result?

A clear showing that the separate licenses were an artifice designed to evade tax.

Citations and references

• California Sales and Use Tax Regulation 1504(a)(3), printed as “15034(a)(3)” in the source
• June 10, 1991 request, paragraph 3 contract language, invoices, mailing lists, and audit records — described or quoted but not included

Verbatim support

From the official June 28, 1991 letter:

The terms of each agreement are specific with respect to each licensing and must be given their own effect, absent some clear showing that the separate licensings were an artifice designed to evade tax - - which is not the case here.

In summary, it is our opinion the transactions in question are 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/340-0131.pdf

Original ruling text

340.0131

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)

June 28, 1991

Mr. J--- A. H---, Jr.
The D--- & B--- C--XXX --- Avenue
--- ---, -- XXXXX

Dear Mr. H---:
This is in reply to your letter dated June 10, 1991, addressed to Mr. Ronald Dick. Your letter was received in Sacramento on June 25, 1991. One of your subsidiaries, D---’s M--- S---, Inc. (DMS), is being audited by this agency. Our auditor agreed with you that a letter from this office would be helpful in resolving one issue. The issue concerns the taxability of mailing labels. DMS sells mailing labels and has the customer sign a contract agreement. Under paragraph 3 concerning restrictions on use, the contract specifically states, “The customer agrees that all pressure sensitive or Cheshire mailing records on which the information may be provided may be used once and may not be duplicated in whole or in part in any form or manner whatsoever.” The auditor has noticed on some invoices, the words “Duplicate” or “Reuse” was printed in the explanation. You explained that the list of labels was from a similar group of parameters ordered prior to this request; for example, a list of doctors in the Sacramento area. You explained it did not give the customer the right to use the names more than once. Our Regulation 15034(a)(3) provides, in relevant part, as follows: Tax does not apply to charges for the transfer or use of mailing lists, where a contract restricts the transferee or user to use of the mailing list one time only. The charges in such cases are considered to be for information or addressing services. We are in agreement with your contention that it does not necessarily follow that a subsequent licensing of a mailing list for use by the same customer disqualifies the first licensing or the second licensing from nontaxability. The terms of each agreement are specific with respect to

Mr. J--- A. H---, Jr.

-2-

June 28, 1991
340.0131

each licensing and must be given their own effect, absent some clear showing that the separate licensings were an artifice designed to evade tax - - which is not the case here. The separate character of each agreement is supported by the fact that the mailing list is dynamic, and changes from transaction to transaction. In summary, it is our opinion the transactions in question are nontaxable.

Very truly yours,

Gary J. Jugum
Assistant Chief Counsel

GJJ:sr
bc:

--- District Administrator