Did a newspaper's full-page local-scene cover photograph count as news or advertising when applying California's periodical exemption?

Plain-English summary

A redacted publisher issued “This Week,” a weekly newspaper with eight editions distributed across different parts of Napa and Solano Counties. California treated all eight as one publication for sales-and-use-tax purposes.

The publisher's corporate controller said Pleasant Hill field staff had tested sample issues under Regulation 1590. Treating each full-page local-scene cover photograph as advertising left less than 10 percent information in more than half the tested issues. The controller instead argued the photographs were news or information because they promoted no business or product and depicted scenes of general interest.

Counsel construed the argument as treating the photograph as news or information and disagreed. Regulation 1590 required a connection between issues “in the nature of the articles appearing in them,” and a photograph by itself was not an article. But it was not advertising either because it promoted no particular business or product. It still remained in the issue's total printed area.

The letter framed a two-part test: first, did different issues contain news or general-interest information in article form; second, if so, was advertising 90 percent or less of the entire printed area in more than half the issues over 12 months? The August 1, 1984 Fairfield South/Suisun edition contained general-interest Food/Lifestyle articles. Those articles did not appear to occupy 10 percent, but that was not the second test; the second test measured advertising against total printed area, including the cover photo.

Counsel did not decide whether “This Week” was exempt. Pleasant Hill audit staff still had to make or review the calculations.

Source and live-annotation limits

The official PDF does not include the September 17, 1984 request, any “This Week” issue, the eight editions, cover photographs, August 1 Fairfield South/Suisun edition, Food/Lifestyle articles, advertising or article measurements, sample dates, calculations, field-office test, publisher records, distribution evidence, enclosed Regulation 1590, returns, exemption claim, audit workpapers, assessment, payment, claim, appeal, or other outcome. The publisher, controller, addresses, account, district, and most recipients are redacted.

The first page and all underlying correspondence dates say 1984, while the continuation header visibly prints “Oct. 30, 1994.” This page follows the formal first-page date and discloses the conflict. It also preserves the source's printed “12-mont period” rather than silently correcting the original-text tail.

The live annotation accurately preserves the two-part test and neither-news-nor-advertising treatment of unrelated local-scene photos. It omits the request and publisher, eight Napa and Solano editions, competing calculations, controller's argument, Pleasant Hill testing, quoted article language, August 1 issue and Food/Lifestyle section, unresolved exemption, audit deferral, missing enclosure and records, internal date conflict, printed defect, redactions, and outcome limits.

A later May 20, 1985 Assistant Chief Counsel letter published for Annotation 385.0350 says Regulation 1590 contemplates only two printed-matter classifications—qualifying news or information and nonqualifying advertising—and rejects removal of a third neutral category. That conflicts with this 1984 letter's express conclusion that the photographs were neither news nor advertising while remaining in total printed area. The official sources do not resolve the inconsistency.

What this means for you

Newspaper publishers and tax professionals

Preserve every issue, article, photograph, advertisement, classification and area calculation for the full test period. This letter treated a nonpromotional photograph as part of the denominator without treating it as news or advertising, but later staff guidance conflicts with that category structure.

Common questions

Q: Did the cover photograph count as news?

A: No. Tax Counsel said a photograph by itself was not an article.

Q: Did it count as advertising?

A: No. It did not promote a particular business or product.

Q: Was it excluded from the printed-area calculation?

A: No. It remained part of the issue's total printed area.

Q: Did the opinion hold that the newspaper was exempt?

A: No. Audit staff still had to determine whether the publication met Regulation 1590's tests.

Q: Did general-interest articles have to occupy at least 10 percent of printed area?

A: No. The letter said the second test measured whether advertising exceeded 90 percent of total printed area.

Citations and references

• California Sales and Use Tax Regulation 1590
• May 20, 1985 Assistant Chief Counsel letter published for Annotation 385.0350 — later states a conflicting two-category interpretation
• September 17, 1984 request, tested newspaper issues, calculations, Regulation 1590 enclosure, audit and tax records, and outcomes — described or implicated but not documented

Verbatim support

From the official Tax Counsel letter:

A photograph by itself does not constitute an article, and therefore does not qualify as news or information of general interest.

On the other hand, these photographs also do not count as advertising, since they only illustrate scenes in and around the newspaper’s general distribution area, and do not advertise a particular business or product.

We are not in a position to determine whether or not “This Week” is in fact an exempt newspaper.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 385.0386
• Original supporting opinion: 385.0386 PDF

Original ruling text

385.0386

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-3237

October 30, 1984

H--- R. H--Corporate Controller
L--- C---, Inc.
P.O. Box XXXX
--- ---, CA XXXXX
Re:

L--- C---, Inc. – SR --- XX-XXXXXX
“This Week” newspaper – cover photographs

Dear Mr. H---:
In your letter to me dated September 17, 1984, you relate that L--- publishes a weekly newspaper, “This Week.” Although there are eight different editions of the newspaper distributed in different geographic areas of Napa and Solano Counties, it is regarded as a single publication for sales and use tax purposes. You relate in summary the Mr. Bob Roos of the Board’s Pleasant Hill field office has tested the publication as issued on certain sample dates to determine whether it meets the definition of an exempt newspaper under Regulation 1590. You state that Mr. Roos considered the full-page photograph on the front page of the newspaper as advertising; if it were so regarded, then the “information” portion of the newspaper would be less than 10% of the printed area in more than half the issues tested, and the newspaper would not meet that requirement of Regulation 1590. On the other hand, you contend the front page photograph should be regarded as exempt, because the photographs which you select for publication are not intended to advertise any particular business or product. Rather, the photographs you select are of scenes in and around the newspaper’s distribution area, and are of general interest to your readers. If the front page is regarded as exempt, then the information portion of the tested issues would exceed 10% and the newspaper would be exempt under Regulation 1590. We assume that what you mean by your contention that the front page photograph is exempt, is that it should be counted as news or information of general interest to the public. We do not agree. We view the “news or information” requirement as qualified by the phrase in Regulation 1590 that “there must be some connection between the different issues of the series in the nature of the articles

L--- C---, Inc.

-2-

Oct. 30, 1994
385.0386

appearing in them.” (Emphasis added). A photograph by itself does not constitute an article, and therefore does not qualify as news or information of general interest. On the other hand, these photographs also do not count as advertising, since they only illustrate scenes in and around the newspaper’s general distribution area, and do not advertise a particular business or product. These photographs nevertheless do comprise part of the printed area of the entire issue. In this situation, Regulation 1590 in effect imposes a two-part test. First, does the newspaper contain news or information of general interest to the public in the form of articles in the different issues? Second, if so, does the advertising portion of the newspaper constitute 90% or less of the printed area in more than half the issues in a 12-mont period? The August 1, 1984 issue (Fairfield South/Suisun edition) you enclosed contains several articles of general interest in the Food/Lifestyle section. Although these articles do not appear to comprise 10% of the newspaper’s printed area, that is not the second part of the test; rather, the newspaper will meet the second part of the test if its advertising portion typically does not exceed 90% of the printed area (including the front page photograph). We are not in a position to determine whether or not “This Week” is in fact an exempt newspaper. Rather, we will defer to our Pleasant Hill audit staff to make the calculations necessary, or review the calculations already made, to determine whether or not this newspaper meets the tests described above. I enclose a copy of Regulation 1590 for your information. Please feel free to contact me if you have any further questions or comments about this letter. Very truly yours,

John Abbott
Tax Counsel

JA:ss
Enclosure
cc:

Bob Roos – Pleasant Hill office

bc:

Oakland – District Administrator
Donald Hennessy