Did adding interactive navigation to a DVD change a motion picture into a computer program, and did including movie clips make a video game a qualified motion picture?

Plain-English summary

California distinguished a motion picture delivered on DVD from a computer-program video game.

A motion picture remained primarily a motion picture even when the DVD included interactive technology used to navigate it. The navigation feature did not change the work's basic character.

A video game remained a computer program even if it incorporated portions of qualified motion pictures. The program might separately qualify as a custom computer program, but neither a computer program nor a custom computer program became a qualified motion picture under section 6010.6.

The memorandum said the referenced prior Board case was fact-specific and not a policy decision, and that Annotation 375.0847 was wrong to the extent it suggested otherwise.

Source and live-annotation limits

The memorandum does not reproduce the July 10, 2000 request, the July 2, 1998 Senior Tax Counsel letter, Annotation 375.0847's backup opinion, the taxpayer's request to revisit the matter, or the unnamed Board case. It supplies no DVD, interactive CD-ROM program, video game, embedded motion-picture portion, custom-program evidence, contract, charge, invoice, tax record, transaction, audit, or later outcome. It says the Board case was fact-specific and not a policy decision and notes that no memorandum decision existed.

The live annotation preserves only that a motion picture on DVD remains primarily a motion picture under section 6010.6 when interactive technology navigates it. It omits the redacted taxpayer and request, internal memorandum and earlier-letter chain, longstanding-interpretation statement, CD-ROM and video-game result, possible custom-program status, correction of Annotation 375.0847, fact-specific Board case, absence of a policy or memorandum decision, missing records, and later-outcome gap.

What this means for you

Media producers, software developers, and tax professionals

Identify the product's primary character and the role of interactivity. Navigation of a motion picture differs from a program whose core function remains game or software operation.

Common questions

Q: Did interactive DVD navigation prevent motion-picture treatment?

A: No.

Q: Did embedded movie clips make a video game a qualified motion picture?

A: No.

Q: Would custom-program status change that motion-picture conclusion?

A: No. A custom computer program still was not a qualified motion picture.

Q: Did the memorandum treat the referenced Board case as a policy decision?

A: No. It called the case fact-specific and said there was no memorandum decision.

Citations and references

• California Revenue and Taxation Code § 6010.6
• July 10, 2000 request memorandum — described but not included
• July 2, 1998 Senior Tax Counsel letter — quoted but not included in full
• Business Taxes Law Guide Annotation 375.0847 dated May 28, 1999 and its backup opinion — described but not included
• Unnamed recent Board case with no memorandum decision — described but not included
• Taxpayer request, DVD, CD-ROM program, video game, embedded motion pictures, and transaction records — described or assumed but not documented

Verbatim support

From the official November 3, 2000 memorandum:

A motion picture on a DVD is still primarily a motion picture even if it includes interactive technology in order to navigate that motion picture.

A computer program video game is still a computer program, even it if includes portions of qualifying motion pictures. It is entirely possible that the computer program may qualify as a custom computer program, but a computer program, or a custom computer program, is not a qualified motion picture.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 375.0848
• Original supporting opinion: 375.0848 PDF

Original ruling text

State of California

Board of Equalization
Legal Division-MIC: 82

375.0848

Memorandum
To :

Mr. Vic Anderson
Supervising Tax Auditor
Special Projects Team

From :

David H. Levine
Tax Counsel IV

Subject:

Date:

November 3, 2000

Telephone: (916) 445-5550

CalNet 485-5550

E---, Inc.
SR -- XX-XXXXXX

This is in response to your memorandum dated July 10, 2000 regarding video games. Senior Tax Counsel Ronald L. Dick had responded by letter dated July 2, 1998 on this subject, concluding that “although an interactive CD ROM program, such as the one [you] describe, or a video game may embody a qualified motion picture in part, the CD ROM program or video game is not itself then a ‘qualified motion picture’ for purposes of section 6010.6.” This has been our interpretation for some time, and remains the correct interpretation of section 6010.6. The taxpayer’s request for us to revisit this matter is based on a statement in the backup to Business Taxes Law Guide Annotation 375.0847 (5/28/99). That opinion concerned whether a motion picture that was on a DVD nevertheless was a qualified motion picture. The underlying opinion in the affirmative referred to a recent Board case. However, not only was that case specific to the facts and not a decision of Board policy (e.g., there was no memorandum decision), but it was wholly unnecessary to the analysis. A motion picture on a DVD is still primarily a motion picture even if it includes interactive technology in order to navigate that motion picture. A computer program video game is still a computer program, even it if includes portions of qualifying motion pictures. It is entirely possible that the computer program may qualify as a custom computer program, but a computer program, or a custom computer program, is not a qualified motion picture. To the extent that the annotation says otherwise, it is wrong. DHL/cmm cc:

Ms. Charlotte Paliani (MIC:92)
Mr. James C. Kuhl (MIC:40)