How did California allocate identical advertising inserts between a taxable weekly shopper and an exempt daily newspaper?

Plain-English summary

John Abbott sent Donald J. Hennessy a draft of two proposed weekly-shopper annotations, incorporating suggestions from Gary Jugum and Hennessy and copying Glenn Bystrom. The official source reproduces only the draft that became Annotation 385.0740; it does not include the other draft or any suggestions.

The proposed facts described a publisher producing an exempt daily newspaper sold to subscribers and a taxable weekly shopper distributed free only to nonsubscribers. Identical advertising inserts could be divided between the two publications.

A printer's charge to an advertiser was taxable for inserts transferred to the newspaper publisher for inclusion in the taxable shopper. The same applied when a newspaper publisher printed inserts and transferred them to a second publisher's taxable shopper.

Copies incorporated into the exempt daily newspaper could be treated as exempt component parts. The printer needed documentation showing the proportion placed in the exempt newspaper versus the taxable shopper.

Source and live-annotation limits

The official PDF does not include the second proposed annotation, Jugum's or Hennessy's suggestions, source inquiry, newspaper, shopper, advertising inserts, advertiser directions, printing or transfer contracts, component records, allocation documentation, copy counts, prices, invoices, sales, returns, tax calculations or payments, audit, assessment, claim, appeal, final annotation-adoption record, or later outcome. The publisher, second publisher, printer, advertiser, publications, transactions, and amounts are unidentified.

The proposed text prints “publishes prints” and “direction fo.” The live annotation silently corrects those forms while otherwise preserving the full proposed rule. It omits the memorandum, named staff and copy recipients, two-draft statement, missing suggestions and other draft, source's proposal posture, missing records, and outcome limits. The original-text section preserves the official PDF verbatim.

What this means for you

Printers, newspaper publishers, and tax professionals

Track identical insert runs by final publication and retain advertiser directions, printer and publisher contracts, transfer records, copy counts, invoices, returns, and allocation evidence supporting each exempt and taxable share.

Common questions

Q: Were shopper inserts taxable?

A: Yes.

Q: Were copies placed in the exempt newspaper taxable?

A: No, if treated as documented component parts.

Q: Could the printer estimate without records?

A: The opinion required documentation of the proportion.

Citations and references

• The source states the Board's allocation treatment but cites no statute or regulation.
• Draft of two proposed weekly-shopper annotations — only the 385.0740 text is reproduced
• Gary Jugum's and Donald Hennessy's suggestions — described but not included
• Publications, inserts, advertiser directions, contracts, allocation, transaction, and tax records — implicated but not documented

Verbatim support

From the official Legal memorandum and proposed annotation:

I have attached a draft of two proposed annotations on the weekly shopper issue, incorporating Gary Jugum’s suggestions and your suggestions.

Where copies of the same advertising inserts become component parts of the daily newspaper, the printer may regard those copies as exempt if it obtains documentation regarding the proportion of copies included in the exempt newspaper to the copies included in the taxable weekly shopper.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 385.0740
• Original supporting opinion: 385.0740 PDF

Original ruling text

State of California

Memorandum

To:

Mr. Donald J. Hennessy

From:

John Abbott
Legal

Subject:

Proposed Annotations – newspaper publisher’s weekly shopper

Board of Equalization

385.0740

May 11, 1988

I have attached a draft of two proposed annotations on the weekly shopper issue, incorporating Gary Jugum’s suggestions and your suggestions.

JA:jb
cc:

Mr. Gary J. Jugum
Mr. Glenn A. Bystrom

5/11/88
Advertising inserts in taxable shopper and exempt newspaper. A newspaper publishes prints both a tax-exempt daily newspaper sold to subscribers, and a taxable weekly shopper distributed free only to non-subscribers. Where another printer prints advertising inserts for an advertiser and at the direction fo the advertiser, transfers the inserts to the newspaper publisher to be included in the weekly shopper, tax applies to that printer’s charges to the advertiser. Likewise, the newspaper publisher is liable for tax on its printing charges if the publisher transfers advertising inserts to a second publisher to be included in the second publisher’s taxable weekly shopper. Where copies of the same advertising inserts become component parts of the daily newspaper, the printer may regard those copies as exempt if it obtains documentation regarding the proportion of copies included in the exempt newspaper to the copies included in the taxable weekly shopper.

JGA