Were envelopes or wrapping paper bought to mail a free exempt publication themselves exempt as components or nonreturnable containers?

Plain-English summary

Los Angeles review staff asked about a person who gave away an exempt publication and bought envelopes or wrapping paper to mail it. Sales Tax Counsel said the issue had also been discussed with an otherwise unidentified Mr. Say.

California concluded that the mailing materials were not ingredients or component parts of the publication under former section 6362.

The purchase also did not qualify under section 6364's nonreturnable-container rule because the buyer gave away the publication instead of selling the contents and container. The seller's sale of the envelopes or wrapping paper to that buyer was taxable.

Source and live-annotation limits

The official PDF does not include the March 3 review memorandum, whose year is not printed, or the publication, envelopes, wrapping paper, mailing or distribution records, purchase, seller, price, invoice, return, audit or assessment, or later outcome. It identifies no publisher, distributor, seller, publication, or purchaser; redacts the account; and gives no role for Mr. Say beyond stating that counsel discussed the problem with him.

The live annotation accurately repeats the component-part, nonreturnable-container, and taxable-sale conclusions. It omits the March 3 request, Los Angeles review origin, discussion with Mr. Say, statutory numbers, redacted account, and source and outcome limits.

What this means for you

Free-publication distributors, mailers, and tax professionals

The publication's exemption did not automatically extend to separate mailing materials. Preserve the publication, packaging, purchase, mailing, and sales records needed to show whether material becomes part of a product and whether the contents and container are actually sold.

Common questions

Q: Did the envelopes become components of the publication?

A: No.

Q: Why did the nonreturnable-container exemption fail?

A: The purchaser gave away the publication rather than selling the contents and container.

Q: Was the sale of the mailing materials taxable?

A: Yes.

Citations and references

• Former California Revenue and Taxation Code § 6362
• California Revenue and Taxation Code § 6364
• March 3 Los Angeles review memorandum — described but not included; its year is not printed
• Publication, mailing materials, purchases, tax records, and outcomes — described or implicated but not documented

Verbatim support

From the official Sales Tax Counsel correspondence:

We believe that envelopes or wrapping paper in which publications are enclosed are not properly regarded as ingredient or component parts of the publication within the meaning of Section 6362.

It is not exempt under Section 6364 as a nonreturnable container sold to a person who sells the contents and container, nor is it exempt under Section 6362 as the sale of property which becomes an ingredient or component part of the publication.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 385.0220
• Original supporting opinion: 385.0220 PDF

Original ruling text

STATE BOARD OF EQUALIZATION
OFFICE CORRESPONDENCE

385.0220
Place:
Date:

To:

Los Angeles – Review (PER)

From:

Headquarters – Sales Tax Counsel

Re:

Envelopes used to mail exempt publication,
Which publication is given away, not sold

Sacramento
March 20, 1953

Mr. Say and I have discussed the problem mentioned in your memo of March 3 and it is our opinion that envelopes or wrapping paper in which publications are enclosed are not properly regarded as ingredient or component parts of the publication within the meaning of Section 6362. Accordingly, where a person who gives away a publication purchases envelopes or wrapping paper to use as containers of the publication, the sale of the envelopes or wrapping paper to him is taxable. It is not exempt under Section 6364 as a nonreturnable container sold to a person who sells the contents and container, nor is it exempt under Section 6362 as the sale of property which becomes an ingredient or component part of the publication.

E. H. Stetson
EHS:ph