Were negative-cutting charges and incidental transferred materials taxable after section 6010.6 took effect for qualified motion pictures?
Apply this to your situation
This page answers the general question as of 1989. Ask about yours and see what current California tax law says, with citations.
Plain-English summary
California said negative cutting performed on a qualified motion picture was a nontaxable qualified production service beginning September 22, 1988.
The cutting company was the consumer of materials used in the work and had to pay sales-tax reimbursement or use tax when buying them. No additional tax applied to materials transferred to customers incidentally with the nontaxable service.
Source and live-annotation limits
The letter does not reproduce the January 20, 1989 request, identify the recipient or the redacted company, or include the attached copy of Senate Bill 1405. It supplies no qualified motion picture, negative-cutting work, material, incidental transfer, vendor purchase, sales-tax reimbursement, use-tax payment, charge, invoice, tax return, completed transaction, audit, assessment, refund, or later outcome.
The live annotation preserves the qualified-motion-picture condition, nontaxable cutting result, provider-consumer rule, acquisition-tax result, and incidental-transfer rule. It omits the recipient and company, January 20 request, Senate Bill 1405, September 22, 1988 effective date, section 6010.6(b)(4), absent attachment and records, and later-outcome gap.
What this means for you
Negative cutters and tax professionals
Document the qualified motion picture, service date, cutting work, materials used and transferred, and acquisition tax paid. This letter states the rule beginning September 22, 1988; it does not establish the treatment of any documented transaction.
Common questions
Q: Were negative-cutting charges taxable?
A: No, when performed on a qualified motion picture after the stated effective date.
Q: Who consumed the materials?
A: The cutting company.
Q: Was separate tax due on incidentally transferred materials?
A: No.
Citations and references
- California Revenue and Taxation Code § 6010.6(b)(4)
- California Senate Bill 1405 — cited as adding section 6010.6; attached copy absent
- January 20, 1989 request — described but not included
- Motion picture, cutting work, materials, transfers, charges, purchases, and tax records — described or assumed but not documented
Verbatim support
From the official letter:
Therefore, charges by --- --- --- for negative cutting are now nontaxable qualified production services when performed on a qualified motion picture.
You are the consumer of any materials which you use in providing the service.
When you provide nontaxable qualified production services, no tax applies to your charge for the materials that you transfer to your customers incidental to your performance of tile services...
Source
- Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
- Annotation page: Annotation 375.0886.250
- Original supporting opinion: 375.0886.250 PDF
Original ruling text
375.0886.250
STATE OF CALIFORNIA
STATE BOARD OF EQUALIZATION
916-445-6450
February 21, 1989
Dear: --This is in reply to your January 20, 1989 letter regarding the application of sales tax to charges by --- --- --- for negative cutting in light of the recent passage of Senate Bill 1405. Senate Bill 1405 added section 6010.6 to the Revenue and Taxation Code effective September 22, 1988. A copy of the bill is attached for your information. Under section 6010.6, charges for “qualified production services” are nontaxable beginning September 22, 1988. The term “qualified production services” is defined at subdivision (b)(4) and includes “cutting services”. Therefore, charges by --- --- --- for negative cutting are now nontaxable qualified production services when performed on a qualified motion picture. You are the consumer of any materials which you use in providing the service. AS a consumer, you should pay sales tax reimbursement to your vendors or pay use tax when purchasing such materials. When you provide nontaxable qualified production services, no tax applies to your charge for the materials that you transfer to your customers incidental to your performance of tile services... We hope this answers your question; however, if you need further information, feel free to write again.
Very truly yours,
Ronald L. Dick
Tax Counsel
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