Was a nonprofit's member-periodical subscription exempt when its price was included in dues and the publication was mailed to members?

Plain-English summary

A redacted requester wrote that nonprofit organizations commonly included the subscription price for newsletters and other frequently issued publications in membership dues. Members viewed receipt as a benefit, and organizations commonly mailed the publications for timely delivery.

Counsel explained that section 6362.7(b), operative November 1, 1992, exempted sales and use of property becoming an ingredient or component of a periodical regularly issued at average intervals no longer than three months. It also exempted a qualifying periodical sold by subscription and delivered by mail or common carrier. Subdivision (c) defined a periodical.

California agreed with the requester's conditional conclusion: when a nonprofit included a subscription to a subdivision (c) periodical in its dues and delivered the publication by mail or common carrier, the transaction was an exempt sale.

Source and live-annotation limits

The official PDF does not identify an organization, member, newsletter, other publication, subscription, membership category, dues amount, publication price, issue schedule, content, ingredient or component, mailing or carrier. It does not include the February 11, 1994 request, governing documents, membership offer, publication samples, subscription or member records, invoices, mailing or carrier records, sale, use, return, exemption claim, audit, assessment, payment, refund claim, appeal, or other outcome. The requester and recipient are redacted.

The source describes common nonprofit practice and states a rule conditioned on a qualifying periodical, dues-included subscription, and specified delivery. It does not document an actual organization's transaction or independently establish that any publication met subdivision (c).

The live annotation condenses the conditional rule into one nonprofit scenario and accurately preserves the exempt-sale result. It omits the February request, general-practice provenance, newsletters and other frequently issued publications, member-benefit rationale, November 1, 1992 operative date, ingredient-and-component exemption, three-month interval language, common-carrier alternative, missing records, redactions, and absence of an identified transaction or outcome.

What this means for you

Nonprofit organizations and tax professionals

Document that membership dues include the subscription, retain issues and schedules supporting periodical status, and preserve member, mailing, and common-carrier delivery records.

Common questions

Q: Did inclusion in membership dues prevent subscription treatment?

A: No.

Q: Was every nonprofit newsletter automatically exempt?

A: No. The publication still had to meet section 6362.7(c)'s periodical definition and the delivery requirement.

Q: What delivery methods qualified?

A: Mail or common carrier.

Q: Did the letter establish that a particular nonprofit newsletter qualified?

A: No. It states a conditional rule without identifying a transaction or supplying a publication.

Citations and references

• California Revenue and Taxation Code § 6362.7(b) and (c)
• February 11, 1994 request, nonprofit publications, dues and subscription terms, delivery records, tax records, and outcomes — described or implicated but not documented

Verbatim support

From the official Staff Counsel letter:

Commonly, the subscription price for nonprofit organization newsletters and other frequently issued publications is included in the membership dues paid to the organization.

Receipt of the publication(s) by members is viewed as a membership benefit.

We agree with your conclusion that, when a nonprofit organization includes in its membership dues a subscription to a periodical, as defined at subdivision (c) of Section 6362.7, and delivers the periodicals by mail or common carrier, the transaction is a sale exempt from tax under subdivision (b) of Section 6362.7.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 385.0352
• Original supporting opinion: 385.0352 PDF

Original ruling text

385.0352

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

MEMBER
First District, Kentfield

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
GRAY DAVIS
Controller, Sacramento

April 14, 1994

BURTON W. OLIVER
Executive Director

Dear: --This is in reply to your February 11, 1994 letter regarding the application of sales tax to the distribution of periodicals by nonprofit organizations. As you noted, subdivision (b) was added to Revenue and Taxation Code section 6362.7 operative November 1, 1992 to add an exemption from sales and use tax for the sale and use of tangible personal property which becomes an ingredient or component part of any periodical regularly issued at average intervals not exceeding three months and any such periodical, which is sold by subscription and delivered by mail or common carrier. Subdivision (c) of the section defines periodicals. You go on to note: “Commonly, the subscription price for nonprofit organization newsletters and other frequently issued publications is included in the membership dues paid to the organization. Receipt of the publication(s) by members is viewed as a membership benefit. It is also common practice to distribute publications by mail as a timely means of delivery to the member.” We agree with your conclusion that, when a nonprofit organization includes in its membership dues a subscription to a periodical, as defined at subdivision (c) of Section 6362.7, and delivers the periodicals by mail or common carrier, the transaction is a sale exempt from tax under subdivision (b) of Section 6362.7.

Very truly yours,

Ronald L. Dick
Staff Counsel