When were television research reports nontaxable compiling services rather than taxable information products delivered on tangible media?

Plain-English summary

California said information delivered in tangible form had no general exemption. The question was whether the customer contracted for information or for the service of compiling it. Compilation—not the resulting information—was the service, and the best evidence was a contract price covering the full cost of compiling the data.

On that basis, two redacted report or research offerings described on pages 36 and 42 of an absent document titled in redacted form as “Y--- G--- to R--- and S---” might be nontaxable. In contrast, standard specialty products, industry-wide market data, general industry-segment reports, and standard microcomputer programs were taxable when delivered on tangible media in California. The letter lists multiple redacted examples, including DMA maps and territories, a working study, annual report, and new-media products.

Printed local-market surveys—including two redacted station/television indexes, one dated September 2–8, 1991—had previously qualified as periodicals. After the periodical exemption was repealed effective July 15, 1991, retail sales or California use of those printed surveys became taxable.

In one prior audit, a second auditor had correctly found certain report charges nontaxable but for the wrong reason: the reports were exempt periodicals, not services. The 1992 letter said repeal made them taxable going forward.

The live annotation adds a later legal-status note absent from the letter: operative November 1, 1992, subscription sales of periodicals delivered by mail or common carrier were not subject to tax. Neither source identifies the enacting provision.

Source and live-annotation limits

The official PDF does not include the October 31, 1991 request, “Y--- G--- to R--- and S---” or its pages 36 and 42, report catalog, potentially nontaxable reports, specialty products, market data, industry reports, programs, DMA maps or territories, studies, annual report, new-media products, local-market surveys, station or television indexes, contracts, compilation work or costs, delivery media, customers, invoices, sales, returns, prior audit or workpapers, tax calculations or payments, assessment, claim, appeal, repeal enactment, or later outcome. The company, products, reports, surveys, customers, transactions, and amounts are largely redacted or unidentified.

The live annotation preserves the information-versus-compiling distinction, tangible-media treatment, standard-product categories, local-survey result, July 15, 1991 repeal, and November 1, 1992 note. It omits the October request, company, full-cost contract evidence, two potentially nontaxable products and absent source pages, detailed redacted product examples, two local-survey examples and date, prior audit's correct result and wrong reason, missing records, redactions, and outcome limits.

What this means for you

Research companies, broadcasters, data vendors, and tax professionals

Use contracts, scopes, cost records, and pricing to show whether the buyer commissioned compilation work or bought a finished standard product. Preserve every report and program, customization evidence, delivery medium, invoice, return, audit record, and applicable-law effective date.

Common questions

Q: What evidence supported a compiling-service contract?

A: A contract price covering the full cost of compiling the data.

Q: What standard products were taxable on tangible media?

A: Specialty products, industry-wide market data, general reports, and standard microcomputer programs.

Q: When did printed local-market surveys become taxable?

A: After the periodical exemption's July 15, 1991 repeal.

Q: Was every product classified conclusively?

A: No. Two described offerings only “may” have been nontaxable, and their descriptions are absent.

Q: What later rule does the live annotation flag?

A: It says that, operative November 1, 1992, subscription periodicals delivered by mail or common carrier were not subject to tax.

Citations and references

• October 31, 1991 request — described but not included
• “Y--- G--- to R--- and S---,” including pages 36 and 42 — publication details and copy absent
• Two redacted printed local-market survey indexes, including one dated September 2–8, 1991 — copies absent
• Prior N--- audit and second-auditor determination — audit period, reports, findings, workpapers, and record absent
• July 15, 1991 repeal and live November 1, 1992 rule — neither source supplies an enactment citation or text

Verbatim support

From the official Tax Counsel letter:

The service is not the information; rather, the service is the compiling of the information.

The best evidence of a service contract is that the contract price covers the full cost of performing the service, i.e., compiling the data.

These reports were not taxable because they were exempt periodicals, not because the charges were for services.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 385.0670
• Original supporting opinion: 385.0670 PDF

Original ruling text

385.0670

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-8208

April 17, 1992

Mr. L--- F. P--A--- N--- Company
N--- Plaza
N---, IL XXXXX-XXXX
Re:

Television Survey Reports
SR --- XX-XXXXXX

Dear Mr. P---:
This is in reply to your letter dated October 31, 1991, regarding N--- survey reports. In California there is no exemption for sales of information when the information is delivered in tangible form. The only issue is whether a customer has contracted for the information or for the service of compiling the information. The service is not the information; rather, the service is the compiling of the information. If the service of compiling the information is performed pursuant to the contract in question, then the contract is for a service. The best evidence of a service contract is that the contract price covers the full cost of performing the service, i.e., compiling the data. Based on the above, it appears that charges for the N--- P--- reports and the N--- New Media Services research described on pages 36 and 42 of “Y--- G--- to R--- and S---” may be nontaxable. It is our position that “specialty type products” and “industry wide market data,” including general reports on various industry segments and standard micro-computer programs, are taxable when delivered on tangible media. N--- products such as D--- Maps, D---’s by N--- territories, W--W--- Study, A--- R--- on T---, N--- M--- Services, T--- C---, C---, and D---T---, as found in “Y--- G-- to R--- and S---,” are examples of products which are taxable when delivered in California as tangible personal property. Finally, it is our position, as it has been for many years, that sales of the “local market surveys,” as typified by the N--- N--- Station Index – V--- in P---, ---, NY, and the N--- N--- T--Index, N--- T--- R---, September 2-8, 1991, are sales of tangible personal property. These reports previously qualified for exemption as periodicals. However, since the exemption for periodicals

Mr. L--- F. P---

-2-

April 17, 1992
385.0670

was repealed effective July 15, 1991, all printed “local market surveys” sold at retail in California or purchased for use in California after this date are taxable. With respect to one of the audits of N---, our understanding is that a second auditor correctly determined that charges for certain N--- reports were not taxable but made that determination for the wrong reason. These reports were not taxable because they were exempt periodicals, not because the charges were for services. As noted above, the legislature repealed the periodical exemption and these reports are now taxable. If you have any further questions on this matter, please write to us again. Sincerely,

Elizabeth Abreu
Tax Counsel

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