Did a baseball magazine qualify when covers and selected sections changed during the season but issues lacked interval labels and contained little new editorial material?

Plain-English summary

Oakland audit staff had assessed sales tax on a professional baseball team's magazines for the 1981-1983 seasons because they lacked stated intervals. The taxpayer paid in full and claimed a refund, but the auditor said on November 15, 1984 that the claim was not then being pursued pending a meeting about this opinion.

The taxpayer argued that five to ten seasonal editorial changes, lower-cost reuse of advertising, regular changes noticed by readers, and communication to the public satisfied substance despite no serial numbers. A printer's absent September 13 letter described four years of production.

The 1983 magazine had 132 pages plus its cover. The cover changed five times, including opening night; a 24-page change section changed nine times; and the roster-and-scorecard center spread changed 26 times. The change section included three two-page articles, five player-biography pages, a one-page Hall of Fame quiz, and advertising. Other articles apparently stayed unchanged.

California denied periodical status for two independent reasons. First, readers could not tell which interval an issue represented because no cover or interior label identified it as a monthly, bimonthly, or other issue in a series.

Second, each issue lacked significant new editorial material. Only six full pages of the changed section contained new articles, while player biographies apparently changed only for roster updates.

Counsel said future seasons could qualify if at least four issues prominently identified their position and interval in the series and each average issue devoted at least 10 percent of its space to articles not published in earlier issues.

The source continuation headers say November 21, 1984, while CDTFA annotation metadata lists November 24, 1984.

Source and live-annotation limits

The official PDF does not include the October 15, 1984 audit memo, 1983 magazine, other 1981-1984 editions, covers, change sections, rosters, scorecards, articles, biographies, quiz, advertising, production-cost evidence, September 13 printer letter, editorial or publication schedules, issue sales, assessment, tax calculation or payment, refund claim, November 15 telephone record, proposed taxpayer meeting, future publications, returns, audit workpapers, final determination, appeal, refund disposition, or other outcome. The baseball organization, company, magazine, printer, taxpayer representatives, account, transactions, amounts, and most names are redacted.

The official memorandum has no date on its first page; only second- and third-page headers say November 21, 1984. The live annotation instead gives November 24 without explanation. This page follows the repeated source-body headers and discloses the conflict.

The live annotation accurately preserves the two tests and the cover, changed pages, center-spread, issue-labeling, and 10-percent conclusions. It omits the audit memo, 1981-1983 assessment and full payment, refund claim and paused posture, November call and proposed meeting, four taxpayer arguments, printer letter and four-year history, opening-night detail, named article categories, unchanged articles and biography assumption, future-season framing, missing records, redactions, and outcome limits.

The October 30, 1984 Tax Counsel letter published for Annotation 385.0386 says general-interest articles did not themselves need to occupy 10 percent; its second test measured whether advertising exceeded 90 percent of total printed area. This memorandum instead required at least 10 percent new-article space in an average issue for future qualification. The official sources do not reconcile the conflict.

What this means for you

Seasonal publishers and tax professionals

Preserve prominent issue and interval labels, publication and editorial schedules, every edition and changed page, new versus repeated articles, advertising and space calculations, sales, returns, assessments, payments, claims, meetings, and final outcomes. Check current law rather than assuming this disputed historical 10-percent article rule controls.

Common questions

Q: Did frequent cover and roster changes establish stated intervals?

A: No.

Q: What issue labeling was required?

A: A prominent statement identifying the issue and its interval within the series.

Q: What new-content threshold did counsel specify?

A: At least 10 percent of an average issue devoted to new articles.

Q: Was the refund claim resolved by this memorandum?

A: No. The taxpayer had paid the assessment but was not then pursuing the claim pending a meeting; no later result is supplied.

Citations and references

• Former California Revenue and Taxation Code § 6362
• California Sales and Use Tax Regulation 1590(a)(2)
• October 30, 1984 Tax Counsel letter published for Annotation 385.0386 — states a conflicting article-percentage test
• October 15, 1984 audit memo, magazines, September 13 printer letter, production records, assessment and payment, refund claim, November 15 call and taxpayer meeting, calculations, and outcome — described or implicated but not documented

Verbatim support

From the official Legal memorandum:

Our conclusion is that the A---’s Magazine is not an exempt periodical for two reasons, each of which would by itself be sufficient to subject sales of the magazine to tax.

Although the taxpayer claims this elevates form over substance, the fact remains that there is no way for a reader to determine that a given issue of a publication is one of a series of different issues of the same publication unless the issue states in some manner just what interval (monthly, bimonthly, etc.) is represented by the particular issue.

Our view is that this magazine would qualify as an exempt periodical in future seasons if: (a) each issue of the magazine clearly stated on its cover or in some other prominent way that it was a separate issue within a series of issues, published at least four times at stated intervals during the season, and (b) each issue contained new articles, not previously published in earlier issues, comprising at least 10% of the space in an average issue.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 385.0574.100
• Original supporting opinion: 385.0574.100 PDF

Original ruling text

State of California

Memorandum

To:

Oakland – Auditing (L. H. Woolslayer)

From:

Headquarters – Legal (John Abbott)

Subject:

O--- A---’s B--- Company – SR -- XX-XXXXXX
A---’s Magazine

Board of Equalization

385.0574.100

In your October 15, 1984 memorandum to the legal section, you ask whether the O--- A---’s magazine qualifies as an exempt periodical under Revenue and Taxation Code section 6362 and Sales and Use Tax Regulation 1590. You enclosed a copy of the 1983 A’s Magazine with your memo. You relate that you have assessed tax on the sales of the magazine for the seasons 1981 through 1983, on the ground that the magazine is not issued at stated intervals. The taxpayer has paid the tax in full and has filed a claim for refund based on its contention that the magazine is an exempt periodical. In our telephone conversation on November 15, 1984, you stated that the taxpayer is not pursuing this claim for refund at least until such time as you meet with the taxpayer’s representatives to discuss this opinion. You summarize the taxpayer’s contentions as follows: Our assessment was based on the fact that it is not issued at “stated” intervals. The taxpayer states that this is really a matter of form and not substance and aside from formally serializing the issues, the magazine was in fact issued at stated intervals, arguing that:

1. There is substantial editorial change during a season, ranging from 5 to 10
   times per five month seasonal period.
2. The particular format following reduced the cost of publication since the
   advertising material did not completely change with each new issue.

O--- A---’s B--- Co.

-2-

Nov. 21, 1984
385.0574.100

3. There is a regular interval of change and the reader of the magazine realizes
   this as each new issue is placed on sale.
4. Acknowledges that serial number was not included, but for reasons as listed
   above the requirements – i.e., stated intervals – are met and being communicated to the reading public. You also enclosed with your memo a copy of a letter dated September 13, 1984 from R--- L--- of South San Francisco to the O--- A---’s. R--- L---, the printer of the magazine, describes how the magazine has been produced over the past four years. For example, R--- L--- states: In 1983 the magazine consisted of 132 pages plus cover. Sections that changed were: A) The cover changed five times during 1983 including a special cover for opening night. B) The change section was 24 pages; page numbers 33 – 44 and 89 – 1—was changed nine times during the year. C) The center spread was changed twenty-six times during the season. (I use this example both because it relates to the 1983 magazine which you enclosed, and because it is representative of the changes detailed for the 1981, 1982, and 1984 seasons). Finally, you state that the taxpayer requests that we outline the requirements needed to qualify the magazine as an exempt periodical, if we feel it does not qualify as it has been published in the past. We note that in the 1983 magazine, the “center spread” referred to in R--- L---’s letter is the O--A---’s and the visiting team’s roster, plus a scorecard. The “change section” in the particular issue you enclosed contains three two-page articles, “A---’s Outlook for 1983,” “A--- L--Preview,” and “Opening Night Fifteen Years Ago,” five pages entitled “meet the A---’s,” which are short biographies of the players, and a one-page quiz, “Test Your Hall of Fame Trivia.” The balance of the change section consists of advertising. Although there are other articles in the magazine, apparently these articles were not changed during the course of the season, since they are not part of the change section. Our conclusion is that the A---’s Magazine is not an exempt periodical for two reasons, each of which would by itself be sufficient to subject sales of the magazine to tax. First, the magazine is not issued at stated intervals, as required by Regulation 1590(a)(2). Although it is true that there are different “issues” of the magazine, in the sense that the cover

O--- A---’s B--- Co.

-3-

Nov. 21, 1984
385.0574.100

and the change section are new in each successive publication, the magazine nowhere indicates that this is so. Neither on the front cover nor anywhere inside does the magazine purport to be anything but a single magazine for (in the sample copy you sent) the 1983 season. Our view is that in order for a publication to qualify as one issued at average intervals not exceeding three months, the publication must state in some prominent manner just what issue, within a series of issues, the reader is purchasing. Although the taxpayer claims this elevates form over substance, the fact remains that there is no way for a reader to determine that a given issue of a publication is one of a series of different issues of the same publication unless the issue states in some manner just what interval (monthly, bimonthly, etc.) is represented by the particular issue. We think the stated interval requirement takes on added significance in a situation where, as here, the great majority of the contents of the magazine does not change from “issue” to “issue.” Since the magazine purports only to be the 1983 A---’s magazine, and not, say the June-July 1983 A---’s magazine, no reader will be disappointed to find the magazine largely unchanged from one purchased earlier in the season. Second, we consider that the A---’s magazine does not meet the requirement of Regulation 1590(a)(2) that each issue must contain news or information of general interest, in the nature of articles appearing in the different issues of the series. We view this requirement to mean that each issue must contain a significant amount of space devoted to new articles which have not appeared in previous editions of the periodical. In the 1983 magazine, only six full pages in the change section consist of articles not reprinted throughout the various editions of the magazine during the 1983 season. Even if we assume that the short biographies of A---’s players in the “Meet the A---’s” section constitute an article, we assume these biographies did not change significantly throughout the various editions of the 1983 magazine, except to reflect roster changes. Our view is that this magazine would qualify as an exempt periodical in future seasons if: (a) each issue of the magazine clearly stated on its cover or in some other prominent way that it was a separate issue within a series of issues, published at least four times at stated intervals during the season, and (b) each issue contained new articles, not previously published in earlier issues, comprising at least 10% of the space in an average issue.

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