Which master, protection, viewing, archive, broadcast, and graphics transfers were nontaxable production services, and which were taxable sales?

Plain-English summary

A dubbing company asked about master, protection, viewing, archive, and broadcast dubs, along with graphics work.

California treated dubs not intended for exhibition or broadcast as products of nontaxable qualified production services. That included master, protection, viewing, and archive dubs. The provider consumed and owed tax on property used to make them.

Dubs bought for exhibition or broadcast were taxable release prints. If a copy was suitable for exhibition or broadcast, the provider should treat it as taxable unless the client notified it otherwise. Counsel advised that invoice statements identifying qualified production services generally would be sufficient audit support and that customer purchase orders describing the services would provide further evidence; the source includes neither record.

Work on private noncommercial motion pictures was taxable. Graphics embodied on videotape and paintings or graphic art transferred as part of qualified effects, title, or credit work were nontaxable, but ordinary artwork delivered on paper was taxable.

Source and live-annotation limits

The official PDF responds to a May 16, 1989 request, relies on a copy of the requester's February 28 letter for the graphics facts, and encloses proposed Regulation 1529. None of those materials is included. The regulation was scheduled for a public hearing and represented Board staff's view at the time. The letter assumes without source records that “dubs” means duplicate videotapes.

The PDF identifies no client or qualified motion picture and supplies no dub, film, tape, material purchase, graphics transfer, painting, paper art, contract, invoice, purchase order, tax return, assessment, refund, or later outcome. The live annotation preserves the nonexhibition-dub service treatment, provider-consumer rule, and taxable exhibition-or-broadcast result. It omits the proposed regulation's status and pinpoint citations, duplicate-tape assumption, exhibition-quality presumption, invoice and purchase-order advice, private-use rule, all graphics and artwork results, missing records, and no-outcome limit.

What this means for you

Dubbing companies and tax professionals

Record each dub's actual purpose and quality, obtain customer documentation, and separate video-embodied production graphics from stand-alone paper artwork and private-use projects.

Common questions

Q: Were master, protection, viewing, and archive dubs taxable?

A: No, when not intended for exhibition or broadcast.

Q: Were broadcast dubs taxable?

A: Yes.

Q: Were graphics always nontaxable?

A: No. Qualified video or production transfers were nontaxable, while ordinary paper art was taxable.

Q: Did the source contain invoices or purchase orders proving nontaxability?

A: No. Counsel recommended what those documents should say, but the official PDF includes neither.

Q: Was Regulation 1529 final when the letter was issued?

A: The source calls it proposed, scheduled for public hearing, and representative of staff's view.

Citations and references

• California Revenue and Taxation Code § 6010.6(a)(1)
• Proposed California Sales and Use Tax Regulation 1529(d)(10)(B), page 26
• Proposed California Sales and Use Tax Regulation 1529(b)(3), page 21
• Proposed California Sales and Use Tax Regulation 1529(b)(1)(B), page 18
• May 16, 1989 request — described but not included
• February 28, 1989 letter copy — described but not included
• Proposed Regulation 1529 — enclosed but absent
• Client dubs, graphics, artwork, invoices, purchase orders, tax records, and outcomes — described or advised but not documented

Verbatim support

From the official tax-counsel letter:

We consider that master dubs, protection dubs, viewing dubs, archive dubs, and other such tapes that are not for exhibition or broadcast are the product of the performance of qualified production services.

Therefore, tax applies to your sale of dubs that your client purchases for the purpose of exhibition or broadcast.

Generally, statements on your invoice which indicate that the services you provide are qualified production services as defined in section 6010.6 will be sufficient to establish for audit purposes that your charges are nontaxable.

Generally, however, your other contracts to provide a client with graphics, such as artwork on paper, are subject to tax.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 375.1075
• Original supporting opinion: 375.1075 PDF

Original ruling text

375.1075

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-6450

July 12, 1989

Mr. J--- B. M--- III
President
P--- B--XXXX North --- --- Avenue
--- ---, CA XXXXX
Re:

SR -- XX-XXXXXX

Dear Mr. M--- III:
This is in reply to your May 16, 1989 letter regarding the application of tax to your charges for dubbing videotapes for clients. You asked specifically whether tax applies to charges for master dubs, protection dubs, viewing dubs, and archive dubs or only to charges for dubs which will be aired. We assume that the dubs to which you refer are duplicate copies of a videotape. Enclosed is a copy of proposed Sales and Use Tax Regulation 1529, Motion Pictures, which is scheduled for public hearing and which represents the Board’s staff’s view of the application of tax to charges in connection with the production and transfer of motion pictures. Tax does not apply to your charge for dubs you transfer in connection with your performance of qualified production services. We consider that master dubs, protection dubs, viewing dubs, archive dubs, and other such tapes that are not for exhibition or broadcast are the product of the performance of qualified production services. Accordingly, tax does not apply to your charge for such dubs. You are the consumer of, and tax applies to the sale to you of, tangible personal property which you use in making such dubs. (Proposed Reg. 1529, subd. (d)(10)(B) at page 26.) The manufacture and sale of release prints for exhibition of broadcast is not the performance of qualified production services. (Proposed Reg. 1529, subd. (b)(3) at page 21.) Therefore, tax applies to your sale of dubs that your client purchases for the purpose of exhibition or broadcast.

Mr. J--- B. M--- III

-2-

July 12, 1989
375.1075

If you prepare and transfer to a client a dub which is of a quality suitable for exhibition or broadcast, you should consider the transfer as a sale subject to sales tax unless otherwise notified by the client. Generally, statements on your invoice which indicate that the services you provide are qualified production services as defined in section 6010.6 will be sufficient to establish for audit purposes that your charges are nontaxable. As further evidence, purchase orders you receive from your customers describing your services would also substantiate the nontaxability of your charges. You noted that you understand that tax does not apply to your other services. Nontaxable qualified production services include only fabrication on film, tape, or other audiovisual embodiment in connection with the production of all or any part of a “qualified motion picture” as defined in the regulation. Such work performed on motion pictures for private noncommercial use is subject to tax. (Proposed Reg. 1529, subd. (b)(1)(B) at page 18.) The copy of your February 28, 1989 letter you sent indicates that one of your business activities is “graphics”. Assuming that your transfer of graphics is on videotape, your charge would be nontaxable as the performance of a qualified production service. Further, tax does not apply to your transfer of paintings and other graphic art used by you in filming special effects, titles, or credits when the transfer is in connection with your performance of qualified production services. (Rev. & Tax. Code § 6010.6, subd. (a)(1).) Generally, however, your other contracts to provide a client with graphics, such as artwork on paper, are subject to tax. 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
RLD:sr
Encl.
bc:

--- District Administrator