Must a printer deliver periodicals directly to subscribers for the publisher's subscription sales to qualify for California's delivery-based exemption?

Plain-English summary

A redacted printer asked in a June 24, 1994 letter whether newspaper and periodical delivery requirements matched those for printed sales messages. California said the requirements differed.

For the subscription-periodical exemption under section 6362.7(b), the publisher—the seller to subscribers—had to deliver the periodicals to those subscribers by mail or common carrier.

The commercial printer did not have to deliver to subscribers or use a common carrier when delivering printed copies to the publisher. A publisher making exempt subscription sales could give the printer an exemption certificate or resale certificate, as appropriate, and the printer could deliver to the publisher by any method.

The letter also quoted section 6362.7's no-charge distribution rule and periodical definition. The definition required four to 60 issues per year, general-interest information, continuity between issues, and sufficiently similar style and format, and excluded specified publications exceeding the advertising-area threshold in more than half the issues during a 12-month period.

It quoted separate rules in section 6362.8 for specified nonprofit newspapers and periodicals, including section 501(c)(3) member or contributor distribution, section 501(c)(3) publications accepting no commercial advertising, and nonprofit member distribution where printing cost was less than 10 percent of the membership fee attributable to the distribution period. The direct delivery answer concerned section 6362.7(b), not an applied section 6362.8 factual record.

Source and live-annotation limits

The official PDF does not include the June 24, 1994 request, newspapers or periodicals, printed sales messages, publisher or subscribers, subscription terms, printer sale, delivery records, mail or carrier records, exemption or resale certificates, invoices, returns, audit or assessment, or later outcome. The recipient, printer, address, account, and copied district administrator are redacted. Regulation 1541.5 and proposed Regulation 1590 are identified as enclosures but not included.

The live annotation says section 6362.7(b) was effective November 1, 1992. The linked letter does not state that effective date. The live entry preserves the publisher-delivery and certificate points but omits the June 24 request, printer-delivery freedom, quoted no-charge rule and periodical definition, section 6362.8 alternatives, enclosures, redactions, and source and outcome limits.

What this means for you

Printers, publishers, and tax professionals

Identify which entity sells to subscribers, document the publisher's final delivery by mail or common carrier, and retain subscription, printer-sale, delivery, and exemption or resale certificate records supporting the treatment.

Common questions

Q: Did the printer have to mail copies directly to subscribers?

A: No.

Q: Could the printer deliver copies to the publisher by another method?

A: Yes.

Q: Who had to satisfy subscriber delivery?

A: The publisher making the exempt subscription sale.

Q: Did the linked letter give November 1, 1992 as the rule's effective date?

A: No. That date appears on the live annotation page only.

Citations and references

• California Revenue and Taxation Code § 6362.7(a)-(c) — quoted in part
• California Revenue and Taxation Code § 6362.8(a)-(b) — quoted in part
• Internal Revenue Code § 501(c)(3) — quoted within section 6362.8
• California Sales and Use Tax Regulation 1541.5, Printed Sales Messages — enclosed but absent
• Proposed California Sales and Use Tax Regulation 1590, Newspapers and Periodicals — enclosed but absent
• June 24, 1994 request, publications, subscriptions, deliveries, certificates, tax records, and outcomes — described or implicated but not documented

Verbatim support

From the official Senior Tax Counsel letter:

Under that exemption, the sale of periodicals that are sold by subscription is exempt only when the seller of the periodical delivers them to the subscribers by mail or common carrier.

If you sell periodicals to a publisher, you are not required to deliver the periodicals to the publisher by common carrier, and you are not required to deliver the periodicals to the subscribers.

Rather, a publisher who makes exempt sales of periodicals by subscription may issue an exemption certificate or a resale certificate to you, and you may deliver the printed matter to the publisher by any means.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 385.0210
• Original supporting opinion: 385.0210 PDF

Original ruling text

385.0210

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

MEMBER
First District

450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-6450

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles

August 11, 1994

GRAY DAVIS
Controller, Sacramento
────────
BURTON W. OLIVER
Executive Director

Ms. R--- A--- H--Controller
E--- P--XXXX XX -----, CA XXXXX
Re:

SR -- XX-XXXXXX

Dear Ms. H---:
This is in reply to your June 24, 1994 letter regarding the application of sales tax to your sales of newspapers and periodicals. You asked whether the delivery requirements are the same for newspapers and periodicals as they are for printed sales messages in order for the sale of the newspapers and periodicals to be exempt. No, the delivery requirements are different. There are two Revenue and Taxation code sections that provide exemptions for the sale of newspapers and periodicals. The sections are: “6362.7. There are exempted from the taxes imposed by this part, the gross receipts from the sale of, and the storage, use, or other consumption in this state, of tangible personal property which becomes an ingredient or component part of any newspaper or periodical that is distributed without charge and regularly issued at average intervals not exceeding three months, and any such newspaper or periodical. “(b) There are exempted from the taxes imposed by this part, the gross receipts from the sale of, and the storage, use, or other consumption in this state, of tangible personal property which becomes an ingredient or a component part of any periodical regularly issued at average intervals not exceeding three months, and any such periodical, that is sold by subscription and delivered by mail or common carrier.

Ms. R--- A--- H---

-2-

August 11, 1994
385.0210

“(c) For purposes of this section, 'periodical' means any publication that appears at stated intervals at least four times per year, but not more than 60 times per year, each issue of which contains news or information of general interest to the public, or to some particular organization or group of persons. Each issue must bear a relationship to prior or subsequent issues with respect to continuity of literary character or similarity of subject matter, and there must be some connection between the different issues of the series in the nature of the articles appearing in them. Each issue must be sufficiently similar in style and format to make it evident that it is one of a series. The term does not include printed sales messages, shopping guides, or other publications of which the advertising portion, including product publicity, exceeds 90 percent of the printed area of the entire issue in more than one-half of the issues during any 12-month period. “6362.8. (a) There are exempted from the taxes imposed by this part, the gross receipts from the sale of, and the storage, use, or other consumption in this state, of tangible personal property that becomes an ingredient or component part of any newspaper or periodical regularly issued at average intervals not exceeding three months, or any such newspaper or periodical. “(b) This section shall apply only with respect to any of the following: (1) Any newspaper or periodical that is published or purchased by an organization that qualifies for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code and is distributed to the members of the organization in consideration of payment of the organization's membership fee, or to the organization's contributors. (2) Any newspaper or periodical that is published by an organization that qualifies for tax-exempt status under Section 501(c)(3) of the Internal Revenue Code and does not receive revenue from, or accept, any commercial advertising. (3) Any newspaper or periodical distributed by a nonprofit organization for which both of the following apply: “(A) Distribution is to any member of the nonprofit organization in consideration, in whole or in part, of payment of the organization's membership fee. “(B) The amount paid or incurred by the nonprofit organization for the cost of printing the newspaper or periodical is less than 10 percent or the membership fee attributable to the period for which the newspaper or periodical is distributed.”

Ms. R--- A--- H---

-3-

August 11, 1994
385.0210

Enclosed is a copy of Sales and Use Tax Regulation 1541.5, Printed Sales Messages, and proposed Sales and Use Tax Regulation 1590, Newspapers and Periodicals, for your further information. As you can see, the exemption provided by section 6362.7, subdivision (b), for the sale of periodicals by subscription has a critical delivery requirement. Under that exemption, the sale of periodicals that are sold by subscription is exempt only when the seller of the periodical delivers them to the subscribers by mail or common carrier. If you sell periodicals to a publisher, you are not required to deliver the periodicals to the publisher by common carrier, and you are not required to deliver the periodicals to the subscribers. Rather, a publisher who makes exempt sales of periodicals by subscription may issue an exemption certificate or a resale certificate to you, and you may deliver the printed matter to the publisher by any means. Section 6362.7 requires the publisher to deliver the periodicals to the recipients by mail or common carrier in order for the publisher's sale to qualify as exempt. We hope this answers your questions; however, if you need further information, feel free to write again. Very truly yours,

Ronald L. Dick
Senior Tax Counsel
RLD:plh
Enclosures - Regulation 1541.5
Proposed Regulation 1590
cc:

--- District Administrator - --