Were advertising circulars exempt when some were inserted into newspapers and others were distributed separately by mail and hand?

Plain-English summary

Redacted printer T produced 250,000 throwaway advertising circulars for a redacted advertising firm. T inserted 200,000 in its newspapers for distribution with them and delivered the remaining 50,000 to the firm, which distributed them by mail and hand.

After further consideration of an absent August 26, 1965 letter, California treated the 200,000 newspaper inserts as components of newspapers. Section 6362 and former Sales Tax Ruling 49 exempted the printing and distribution charges for that group.

The other 50,000 circulars were neither printed nor distributed as newspaper components. The advertising firm's sale of those separately distributed circulars to its unidentified client was a taxable retail sale, with its gross receipts subject to sales tax.

Source and live-annotation limits

The official PDF does not include the August 26, 1965 letter, advertising circulars, newspapers, printing agreement, distribution agreement or records, advertising firm's client agreement, recipients, mail or hand-delivery records, prices, invoices, sales, gross-receipts records, returns, exemption claim, tax calculations or payments, audit, assessment, claim, appeal, or later outcome. T, the firm, client, newspapers, recipients, transactions, and amounts other than copy counts are redacted or unidentified.

The live annotation preserves the split between newspaper insertion and separate distribution, component rule, exempt printing charges, and taxable noncomponent sale. It omits the August letter and reconsideration, T and source-party roles, exact 200,000/50,000 counts, former Sales Tax Ruling 49, advertising firm's sale to its client and gross-receipts formulation, missing records, redactions, and outcome limits.

What this means for you

Publishers, printers, advertisers, and tax professionals

Track identical circulars by final distribution channel. Preserve printing and client agreements, every circular and newspaper, insertion and separate-delivery counts, mail and hand-delivery records, invoices, gross receipts, returns, and exemption calculations.

Common questions

Q: How many circulars were inserted into newspapers?

A: 200,000.

Q: Were the printing and distribution charges for those inserts taxable?

A: No. Counsel treated the inserts as exempt newspaper components.

Q: What happened to the remaining 50,000 circulars?

A: They were distributed by mail and hand, and the advertising firm's sale to its client was taxable.

Citations and references

• Former California Revenue and Taxation Code § 6362
• Former California Sales Tax Ruling 49
• August 26, 1965 prior letter, circulars, newspapers, distribution, client sale, transaction, and tax records — described or implicated but not documented

Verbatim support

From the official Associate Tax Counsel letter:

Upon further consideration of this matter, it appears to us that the 200,000 circulars which “T” inserts in its newspapers may properly be regarded as becoming components of newspapers.

Therefore, your sale of these circulars to your client is a retail sale, the gross receipts from which are subject to sales tax.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 385.0760
• Original supporting opinion: 385.0760 PDF

Original ruling text

385.0760

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

September 22, 1965

Gentlemen:
This is in regard to our letter of August 26, 1965 concerning the application of sales tax with respect to throw-away-type advertising circulars which “T” prints for your firm. “T” inserts 200,000 of these circulars in its newspapers for distribution therewith and delivers 50,000 circulars to you, which you distribute by mail and by hand. Upon further consideration of this matter, it appears to us that the 200,000 circulars which “T” inserts in its newspapers may properly be regarded as becoming components of newspapers. Accordingly, the charges for printing and distributing such circulars are exempt from sales tax (Revenue and Taxation Code Section 6362 and sales tax Ruling 49). Inasmuch as the remaining 50,000 advertising circulars are not printed or distributed as components of newspapers, they do not qualify for the exemption. Therefore, your sale of these circulars to your client is a retail sale, the gross receipts from which are subject to sales tax. Very truly yours,

George A. Trigueros
Associate Tax Counsel

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