Were corporate sales, marketing, and training videos qualified motion pictures, and how were the master, duplicates, raw stock, props, and costumes treated?

Plain-English summary

A producer made corporate sales, marketing, and training videos and asked whether only materials and duplication were taxable.

California treated those videos as qualified motion pictures. Charges for producing and transferring the initial version were nontaxable, while the producer consumed and owed tax on raw stock and other tangible property used to create it.

Duplicate tapes and release prints sold to the client were taxable. Other tangible property also retained separate treatment: if the producer bought props or costumes, used them in scenes, and then transferred title to the client in California, that transfer was a taxable retail sale.

The letter contrasted qualified works with private noncommercial wedding or graduation mementos, accident-reconstruction videos for legal analysis, and student class projects, which the cited regulation excluded.

Source and live-annotation limits

The letter does not reproduce the August 31, 1995 request or identify the producer, its clients, or any project. It supplies no production details, motion picture, initial master, raw stock, duplicate or release print, prop, costume, title-transfer record, contract, charge, invoice, tax return, audit, completed transaction, or later outcome. Counsel expressly assumed that the described “production” met Regulation 1529's requirements and invited a later letter with more detail. The copy of Regulation 1529 described as enclosed is absent.

The live annotation preserves only that corporate training and marketing videos qualify, making the producer consumer of tangible property used. It omits the redacted request and assumption, detailed inclusion and private-use exclusion examples, initial-transfer result, raw-stock rule, taxable duplicates and release prints, props and costumes, California-title-transfer condition, request for more facts, missing records and enclosure, and later-outcome gap.

What this means for you

Corporate-video producers and tax professionals

Separate the initial qualified motion picture from duplicates and from props, costumes, or other property whose title passes to the client. Track acquisition tax and final disposition for each item.

Common questions

Q: Were corporate sales, marketing, and training videos qualified motion pictures?

A: Yes.

Q: Who consumed the raw tape for the initial version?

A: The producer.

Q: Were duplicate copies taxable?

A: Yes.

Q: Were props or costumes transferred to the client taxable?

A: Yes, when title passed in California as described.

Citations and references

• California Sales and Use Tax Regulation 1529(b)(1), (b)(2)(B)-(C), (b)(3), and (d)(11)
• California Sales and Use Tax Regulation 1529(b)(1)(A)1 and (b)(1)(B) — inclusion and private noncommercial-use examples
• August 31, 1995 request and enclosed copy of Regulation 1529 — described or referenced but not included
• Production details, master and duplicate tapes, raw stock, props, costumes, client transfers, charges, and transactions — described or assumed but not documented

Verbatim support

From the official November 2, 1995 letter:

For purposes of this opinion, we assume that by “video production services” and “production” of video tapes you refer to producing a motion picture or performing qualified production services within the requirements of Regulation 1529.

When you provide duplicates to your client to use, tax applies to your sale of the duplications or release prints.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 375.0762
• Original supporting opinion: 375.0762 PDF

Original ruling text

375.0762

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

JOHAN KLEHS
First District, Hayward

LEGAL DIVISION – MIC: 82
450 N STREET, SACRAMENTO, CALIFORNIA
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0082
TELEPHONE (916) 327-2291
FAX (916) 323-3387

DEAN F. ANDAL
Second District, Stockton
ERNEST J. DRONENBURG, JR.
Third District, San Diego
BRAD SHERMAN
Fourth District, Los Angeles
KATHLEEN CONNELL
Controller, Sacramento

November 2, 1995

BURTON W. OLIVER
Executive Director

Mr. K--- C--N--- W--- P--XXX-X --- --- Road
Suite XXX
---, CA XXXXX
Re:

Account No. SR -- XX-XXXXXX

Dear Mr. C---:
This responds to your letter dated August 31, 1995 “regarding sales tax for video production services. You write that your business, N--- W--- P--- (N---) produces corporate videos, mostly sales, marketing and training videos. You ask whether these videos are “qualified motion picture[s]” within the meaning of Sales and Use Tax Regulation 1529 and, “therefore, [if] any labor that went into the production of the video master tape was not taxable; but only the material costs and duplication are taxable.” For purposes of this opinion, we assume that by “video production services” and “production” of video tapes you refer to producing a motion picture or performing qualified production services within the requirements of Regulation 1529. Enclosed is a copy of Sales and Use Tax Regulation 1529. As provided in subdivision (b), when you produce a film or videotape which is a “qualified motion picture,” tax does not apply to your charge to your client. Rather, you are the consumer of, and tax applies to the sale to you of, tangible personal property which you use in making the qualified motion picture. A qualified motion picture includes any film or videotape which is produced for exploitation in, on, or through any medium or by a device for any purpose. (Reg. 1529(b)(1).) A qualified motion picture includes, but is not limited to, motion pictures produced for display at theaters, amusement parks, or on commercial carriers; television shows, including closed circuit and broadcast; commercials; trailers; television spots; specials; featurettes; “promos”; “sneaks”; corporate training and sales presentations; video press kits, music videos; and special effects, titles, and credits which are embodied on film, tape, or other motion picture media. (Reg. 1529(b)(1)(A)1.) However, a qualified motion picture does not include films or videotapes for private noncommercial use, such as motion pictures of weddings or graduations to be used as family mementos, accident reconstruction videotapes to be used for legal analysis, or student films to be used for class projects. (Reg. 1529(b)(1)(B).)

Mr. K--- C---

-2-

November 2, 1995
375.0762

Since the videos which you produce are sales, marketing and training videos, they are qualified motion pictures within the meaning of Regulation 1529, and tax does not apply to your charges to your clients for production of these videotapes. Tax does apply, however, to the sale to you of any tangible personal property which you use in making the sales, marketing and training videos. This includes the raw stock which you process to transfer to your client as the final product. (Reg. 1529(b)(2)(B).) When you provide duplicates to your client to use, tax applies to your sale of the duplications or release prints. (See Reg. 1529(b)(3) & (d)(11).) We also note, for your information, that tax applies to other retail sales of tangible personal property which you make. For example, if you purchase items, such as props or costumes, to include in scenes in your videotape and transfer title to the items to your client in California, this is a retail sale subject to sales tax. (Reg. 1529(b)(2)(C).) I hope this information is of assistance. If we may answer any further questions, please write again describing your production work in more detail. Sincerely,

Sharon Jarvis
Staff Counsel
SJ:rz
Enclosure:
cc:

Reg. 1529

--- --- District Administrator - --