Was an entire weekly periodical subscription exempt when 80 percent of copies were mailed but subsidiary employees delivered the remaining 20 percent?

Plain-English summary

A redacted publisher told California that it published a weekly publication in California. The letter unexpectedly names Barrons once while redacting the publication elsewhere.

Approximately 80 percent of subscription copies went by mail. Local trucking companies carried the other 20 percent from a Riverside plant to drop-off sites, where employees of the publisher's wholly owned subsidiary collected them and completed delivery to subscribers.

Assuming the publication otherwise met the periodical definition, California exempted the 80 percent delivered by mail.

The remaining 20 percent did not qualify because it was not delivered by mail or common carrier. The earlier local-trucking leg did not change the stated result after subsidiary employees completed delivery. Counsel strictly construed the exemption and declined to extend section 6362.7 beyond its language, citing McConville and Standard Oil.

Senate Bill 267 had amended section 6362.7 to exempt qualifying periodicals sold by subscription and delivered by mail or common carrier, together with property incorporated into them. The quoted definition required four to 60 issues yearly, news or information of general interest, continuity or subject similarity, a recognizable series style and format, and compliance with the advertising limit.

Source and live-annotation limits

The official PDF does not include the March 2, 1993 request, publication or issues, evidence supporting assumed periodical status, subscriptions, subscriber list, mail records, trucking records, drop-site records, subsidiary or employment records, invoices, prices, returns, allocation, exemption claim, tax calculations or payments, audit, assessment, claim, appeal, or later outcome. The publisher, publication, subsidiary, subscribers, carriers, and transactions are otherwise redacted or unidentified.

The source prints “section .6362.7,” “your sale ... are,” and “Barrons.” The original-text section preserves those forms rather than silently correcting the official record.

The live annotation preserves the approximate delivery percentages, wholly owned subsidiary, assumed periodical status, mail/common-carrier distinction, section 6362.7(b), and proportional result. It omits the March 2 request, California and Riverside facts, local trucking and drop sites, Barrons name, Senate Bill 267, ingredient/component rule, full periodical definition, both strict-construction cases, missing records, redactions, and outcome limits.

What this means for you

Periodical publishers and tax professionals

Track subscription copies through final delivery and separately support the share delivered by mail or a qualifying common carrier. Preserve carrier contracts, related-entity roles, employee-delivery records, invoices, returns, allocation calculations, and evidence that the publication independently meets every periodical element.

Common questions

Q: Did the exemption apply to the mailed copies?

A: Yes, assuming the publication qualified as a periodical.

Q: Did subsidiary-employee delivery qualify?

A: No.

Q: Did an earlier trucking leg make the final deliveries common-carrier deliveries?

A: No, under the conclusion stated in the opinion after subsidiary employees completed delivery.

Q: Did California decide whether the publication qualified as a periodical?

A: No. Counsel expressly assumed that qualification.

Q: Did the letter exempt all third-party delivery?

A: No. It applied the exemption only to the mailed share and strictly construed the statute.

Citations and references

• California Revenue and Taxation Code § 6362.7(b)-(c)
• 1992 California Senate Bill 267
• McConville v. State Board of Equalization, 85 Cal. App. 3d 156 (1978)
• Standard Oil Co. v. State Board of Equalization, 39 Cal. App. 3d 765 (1974)
• March 2, 1993 request, publication, subscription, delivery, corporate, transaction, and tax records — described or implicated but not documented

Verbatim support

From the official Senior Tax Counsel letter:

Assuming that --- qualifies as a periodical, as defined, we agree that, when you sell subscriptions to --- the exemption applies to your sale of the 80 percent delivered by mail.

We disagree with your conclusion that the exemption applies to the sale of the 20 percent of --- subscriptions that are not delivered by mail or common carrier.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 385.0578
• Original supporting opinion: 385.0578 PDF

Original ruling text

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) 324-3828

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

March 25, 1993

BURTON W. OLIVER
Executive Director

Dear --This is in reply to your March 2, 1993 letter regarding the application of sales tax to sales of --- -- ---. You explained that --- published weekly in --- California. Approximately 80 percent of the subscription copies are delivered by mail. The other 20 percent are carried from the Riverside plant by local trucking companies to drop off sites where employees of your wholly owned subsidiary pick up copies of the publication and deliver them to subscribers. You believe that, under 1992 Senate Bill 267, your sale of the 80 percent delivered by mail are clearly exempt. You also believe there was no intention to tax the sale of periodicals delivered by third parties and, therefore, ask our concurrence that all of your subscription sales of Barrons are exempt. As you know, Senate Bill 267 amended Revenue and Taxation Code section .6362.7 to provide an exemption from sales and use tax for the sale and use 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. Subdivision (c) of section 6362.7 defines "periodical": "(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."

Assuming that --- qualifies as a periodical, as defined, we agree that, when you sell subscriptions to --- the exemption applies to your sale of the 80 percent delivered by mail. Since section 6362.7 is an exemption statute, the Board must strictly construe the section to the end that the section will not be enlarged nor extended beyond the plain meaning of the language employed. It is well established that tax exemption statutes are to be strictly construed against taxpayers claiming them. (McConville v. State Board of Equalization, 85 Cal.App.3d 156; Standard Oil v. State Board of Equalization, 39 Cal.App.3d 765.) We disagree with your conclusion that the exemption applies to the sale of the 20 percent of --- subscriptions that are not delivered by mail or common carrier. 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:sr