Which commercial, educational, promotional, wedding, duplicate-video, production, and postproduction charges qualified for motion-picture treatment?

Plain-English summary

A video company produced commercial, educational, promotional, and personal-celebration videos and performed production and postproduction services.

California treated commercial, educational, and promotional videos as qualified motion pictures on the stated facts. The initial videotape transferred to the client was nontaxable, and the producer consumed and owed tax on the blank tape and other tangible property used.

Duplicate copies were taxable. Personal-celebration videos such as weddings were private noncommercial works rather than qualified motion pictures, so their sales were taxable. The quoted regulation also listed graduation family mementos, accident-reconstruction videos for legal analysis, and student class-project films as private noncommercial examples.

Production and postproduction work on a client's qualified motion picture was a nontaxable qualified production service, with the provider consuming materials used. Work on a private noncommercial video was taxable regardless of whether the provider or client supplied the materials.

Source, date, and live-annotation limits

The official PDF quotes from an April 4, 1996 request but does not include it. Counsel says the commercial, educational, and promotional classifications are based solely on the limited information supplied and qualifies the personal-celebration result for unknown facts. The PDF identifies no client or production and supplies no video, shooting, editing, duplication, postproduction work, initial or duplicate tape, blank stock, other material, contract, charge, invoice, return, assessment, refund, or later outcome.

The formal first page says May 13, 1996, while pages 2 and 3 say June 11, 1996; the source offers no correction. The live annotation uses June 11. This page follows the first-page date and discloses the conflict. The live entry preserves the main production facts and conclusions, but omits the seller-number history, counsel's fact limitations, regulation's government-production and private-use examples beyond weddings, specific statutory and regulatory pinpoints, qualified-service material-consumer rule, missing records, and no-outcome limit.

What this means for you

Video producers and tax professionals

Classify the intended audience and purpose, distinguish the initial version from duplicates, and document whether stand-alone services relate to a qualified public-use production or a private memento.

Common questions

Q: Were initial commercial, educational, and promotional videos taxable?

A: No, on the stated facts.

Q: Were duplicate copies taxable?

A: Yes.

Q: Were wedding videos qualified motion pictures?

A: No. They were private noncommercial videos and taxable.

Q: Were production services for qualified motion pictures taxable?

A: No.

Q: Did it matter who supplied materials for private-use work?

A: No. The source treated the provider's charge as taxable whether the provider or client furnished the material.

Q: Is the ruling date free of conflict?

A: No. The first page says May 13, while both continuation pages and the live annotation say June 11, 1996.

Citations and references

• California Revenue and Taxation Code §§ 6006, 6006(b), 6010.6, and 6051
• California Sales and Use Tax Regulation 1529(a)(1), (b)(1), (b)(1)(A), (b)(1)(B), (b)(2), and (b)(3)
• April 4, 1996 request — described and quoted but not included
• Videos, services, client transactions, materials, contracts, invoices, tax records, and outcomes — described but not documented

Verbatim support

From the official senior-staff-counsel letter:

Based solely on the information you provided, it appears that the commercial videos, education videos, and promotional video which you produce are “qualified motion pictures” as defined in Regulation 1529.

Tax does apply to your sale of duplicate copies.

On the other hand, if you perform production and post production work for clients in connection with the production of a motion picture or videotape produced for private noncommercial use, tax applies to your charge regardless of whether you or the client provides the materials upon which you perform the work.

As is the case when you transfer nontaxable qualified motion pictures to your clients, when you perform qualified production services, you are the consumer of, and tax applies to the transfer to you of, the tangible personal property which you use in performing the services.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 375.1295
• Original supporting opinion: 375.1295 PDF

Original ruling text

375.1295

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
LEGAL DIVISION – MIC: 85
450 N STREET, SACRAMENTO, CALIFORNIA
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0082
TELEPHONE (916) 324-2653
FAX (916) 324-2618

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

May 13, 1996

E. L. SORENSEN, JR
Executive Director

Mr. R--- E. Z--President
Z--- P---, Inc.
XXXX --- Avenue #XX
--- ---, CA XXXXX
Dear Mr. Z---:
Your April 4, 1996 letter to Mr. Travis Fullwood regarding the application of sales tax to your charges for videos has been referred to the Board’s legal staff for reply. You provided the following facts: “Z--- P--- Inc. has been a California Corporation since 19XX. We are a small communications company developing communications media. In the early 80’s, ZPI was issued a SR number. However, the state cancelled it stating that it was not needed. “We provide production and post production services to clients. In addition, we produce commercial videos, educational videos, promotional videos and personal celebration (weddings, etc) videos. Our production includes ‘complete production’ which includes shooting, editing and duplication of the videotapes services.” California imposes the sales tax on all retailers at the applicable rate of the gross receipts from the sale of all tangible personal property sold at retail in this state. (Rev. & Tax. Code § 6051.) Revenue and Taxation Code section 6006 defines “sale” generally to mean and include any transfer of tangible personal property for a consideration. Section 6010.6 excluded from the definition of “sale” (1) the performance of any “qualified production services” in connection with the production of all or any part of any “qualified motion picture,” and (2) any transfer of all or any part of any qualified motion picture when the transfer is made prior to the date that the qualified motion picture is exhibited or broadcast to its general audience. As you know, Sales and Use Tax Regulation 1529, Motion Pictures, provides the State Board of Equalization’s interpretation of section 6010.6. Subdivision (b)(1) of Regulation 1529 defines “qualified motion picture”:

Mr. R--- E. Z---

-2-

June 11, 1996
375.1295

“(1) A ‘qualified motion picture’ is any motion picture or portion thereof, whether finished or not, which is produced, adapted, or altered for exploitation in, on or through any medium or by any device for any purpose, including, but not limited to, any entertainment, commercial, advertising, promotional, industrial, or educational purpose. “(A)

Qualified motion picture includes, but is not limited to:

“1.
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’; video press kits; music videos; and special effects, titles, and credits which are embodied on film, tape, or other motion picture media. “2. Original and adapted versions including, but not limited to, adaptation to another language or another medium. “3. Motion pictures produced for the federal government or its instrumentalities, foreign governments, state and local governments, or political subdivisions thereof. “(B) Qualified motion picture does not include motion pictures produced 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.” Based solely on the information you provided, it appears that the commercial videos, education videos, and promotional video which you produce are “qualified motion pictures” as defined in Regulation 1529. In that case, tax does not apply to your transfer of the initial videotape you produce for your clients. Rather, you are the consumer of, and tax applies to the sale to you of, tangible personal property which you use in producing the videotape including the blank tape you purchase from your vendor and transfer to your client. (Reg. 1529, subd. (a)(1) and (b)(3).) Tax does apply to your sale of duplicate copies. (Reg. 1529, subd. (b)(3).) On the other hand, unless there are facts of which we are unaware, the videotapes you describe as “personal celebration (weddings, etc.) videos” are not qualified motion pictures. Sales tax applies to your sales of those videotapes. When you perform production and post production work to clients in connection with the client’s production of all or any part of a qualified motion picture, tax does not apply to your charge, because you perform “qualified production services” as defined at Regulation 1529, subdivision (b)(2). On the other hand, if you perform production and post production work for clients in connection with the production of a motion picture or videotape produced for private noncommercial use, tax applies to your charge regardless of whether you or the client provides the materials upon which you perform the work. (Rev. & Tax. Code § 6006, subd. (b).)

Mr. R--- E. Z---

-3-

June 11, 1996
375.1295

As is the case when you transfer nontaxable qualified motion pictures to your clients, when you perform qualified production services, you are the consumer of, and tax applies to the transfer to you of, the tangible personal property which you use in performing the services. We hope this answers your questions; however, if you need further information, feel free to contact me directly. Very truly yours,

Ronald L. Dick
Senior Staff Counsel

RLD:sr