Could a weekly floppy-disk subscription containing only medical-journal tables of contents qualify as a periodical without articles or its own reader software?

Plain-English summary

Reference Update was distributed on floppy disks 52 weeks a year by subscription, mainly to biomedical professionals. It contained tables of contents from current medical research journals worldwide, with no advertising or articles. Counsel had received the publisher's correspondence with a San Diego senior tax auditor and a package of the disks.

California held that distribution format did not determine periodical status: a qualifying publication could appear on computer disks or paper.

The absence of articles also did not prevent exemption. Tables of contents, indexes, and other tabular data could be news or information of general interest to a segment of the public.

The disks contained data rather than a computer program. Customers needed their own program or the publisher's separately sold “Reference manager” program to read the information. Sales of that reader program remained taxable.

Source and live-annotation limits

The official PDF does not include the November 4, 1988 request, correspondence with the senior tax auditor, disk package, underlying journal contents, customer programs, separately sold reader program, subscription or software prices, customers, contracts, invoices, returns, audit or assessment, enclosed Regulation 1590, or later outcome. The publisher, president, business address, and listed identifier are redacted.

The live annotation preserves the weekly floppy-disk facts and the holdings that tables of contents, indices, and tabular data can qualify without articles. It omits the November 4 request, auditor correspondence and disks reviewed, subscription basis and biomedical audience, no-advertising fact, form-neutral computer-disk-or-paper analysis, data-versus-program distinction, separate taxable reader program, enclosure, redactions, and source and outcome limits.

What this means for you

Database publishers and tax professionals

Separate recurring informational content from reader software, document subscription frequency and audience, and preserve the media, program, contracts, invoices, and technical evidence showing whether the physical medium carries data or a taxable program.

Common questions

Q: Could a floppy-disk publication be a periodical?

A: Yes.

Q: Were articles required?

A: No.

Q: Did tables of contents qualify as information?

A: Yes.

Q: Was the separate reader program exempt?

A: No.

Q: Did counsel review the floppy disks?

A: Yes. The letter says counsel received a package of the periodically issued information on disks, although the package is not published with the opinion.

Citations and references

• California Sales and Use Tax Regulation 1590 — applied and enclosed but the enclosure is absent
• November 4, 1988 request and correspondence with Senior Tax Auditor Ernest R. Lucero — described but not included
• Disks, journal contents, reader programs, subscriptions, software sales, tax records, and outcomes — described or implicated but not documented

Verbatim support

From the official Tax Counsel letter:

For purposes of determining whether a publication qualifies as a periodical, it makes no difference in what form the publication is distributed. Thus, a qualifying newspaper or periodical may be distributed on computer disks as well as on paper.

Our view is that this requirement is met when the information consists of tables of contents, indices, or other types of tabular data. There is no requirement that the news or information must be in the form of articles.

You have correctly noted that your sales of a computer program used to read the information contained on the disks are taxable transactions.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 385.0170
• Original supporting opinion: 385.0170 PDF

Original ruling text

385.0170

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-6493

December 28, 1988

Mr. E--- B. B---, President
R--- I--- Systems, Inc.
XXXX --- Park Way, Suite XXX
---, California XXXXX
R--- I--- Systems, Inc. - SR -- XX-XXXXXX
“Reference Update” publication on floppy disks
Dear Mr. B---:
In your November 4, 1988 letter to the Board’s legal staff, you write in summary that you believe that your publication, “Reference Update,” constitutes a nontaxable periodical within the meaning of the Board’s Sales and Use Tax Regulation 1590. With respect to your publication, I have also received from Mr. Ernest R. Lucero, Senior Tax Auditor, San Diego District office, copies of your correspondence with Mr. Lucero and a package of floppy disks containing the periodically issued information included in “Reference Update.” Your correspondence indicated that “Reference Update” is distributed 52 weeks a year on a subscription basis largely to members of the professional biomedical community. The information (or data) stored on the disks consists of the tables of contents of current medical research journals published throughout the world. The information is not itself a computer program, and can be accessed only by means of a customer’s own program or a separate program, “Reference manager,” which you sell as a taxable computer program. “Reference Update” contains neither advertising nor articles. Opinion Our opinion is that “Reference Update” qualifies as a periodical exempt from sales and use tax under Regulation 1590. For purposes of determining whether a publication qualifies as a periodical, it makes no difference in what form the publication is distributed. Thus, a qualifying newspaper or periodical may be distributed on computer disks as well as on paper. You have correctly noted that your sales of a computer program used to read the information contained on the

Mr. E--- B. B---

-2-

December 28, 1988
385.0170

disks are taxable transactions. “Reference Update” qualifies as a periodical even though it contains no articles. Under Regulation 1590, in order to qualify as a periodical, a publication must (among other things) contain news or information of general interest to the public or some portion of the public. Our view is that this requirement is met when the information consists of tables of contents, indices, or other types of tabular data. There is no requirement that the news or information must be in the form of articles. I enclose a copy of Regulation 1590 for your information. Please feel free to contact me if you have further questions or comments about this letter. Very truly yours,

John Abbott
Tax Counsel
JA:sr
Enclosure
cc:

Mr. Ernest R. Lucero
San Diego District Office