Did a free weekly shopper become part of an exempt daily newspaper because both used substantially the same advertising and news content?

Plain-English summary

An unidentified publisher sold an exempt daily newspaper and distributed a free weekly shopper only to nonsubscribers. The shopper consisted primarily of advertising and included inserts printed by the publisher or received from other printers and advertisers. Most of its advertising, news, and information also appeared in that day's daily newspaper.

California said the shopper was not a component part of the daily newspaper merely because the two used substantially the same content. It had to independently satisfy Regulation 1590, including the rule that advertising could not exceed 90 percent in more than half the issues during 12 months.

If the shopper failed, the publisher consumed the paper, ink, and other tangible property incorporated into it. For inputs bought under a resale certificate, the publisher had to report and pay use tax when it consumed them in printing.

Charges for advertising space in the shopper remained nontaxable service transactions.

Source and live-annotation limits

The official PDF contains only a captioned memorandum text ending with JGA. It does not include a request, underlying publisher facts, daily newspaper or shopper issue, advertising or news content, inserts, subscriber or nonsubscriber records, free-distribution evidence, advertising-area measurements, 12-month issue history, paper or ink, purchase records, resale certificate, advertising-space agreement, prices, invoices, sales, returns, use-tax reporting or payments, audit, assessment, claim, appeal, approval or adoption record, or later outcome. The publisher, publications, advertisers, printers, recipients, transactions, and amounts are unidentified.

The source prints “free of charge only the persons,” while the live annotation adds “to”; the live entry also pluralizes resale certificates. The original-text section preserves the official PDF forms rather than silently normalizing them.

The live annotation otherwise reproduces the memorandum's full substantive rule. It does not supply the missing request, facts, records, author identity beyond the absent JGA initials, approval posture, or outcome.

What this means for you

Newspaper publishers and tax professionals

Test separately distributed editions independently. Preserve both publications and all issues, insert sources, subscriber and distribution records, advertising-area workpapers, input purchases, resale certificates, invoices, returns, use-tax reports, and advertising-space agreements.

Common questions

Q: Did overlapping daily-newspaper content make the shopper a component?

A: No.

Q: Who consumed inputs used in a nonqualifying shopper?

A: The publisher.

Q: Were advertising-space charges taxable tangible-property sales?

A: No. They were service transactions.

Citations and references

• Former California Revenue and Taxation Code § 6362
• California Sales and Use Tax Regulation 1590
• Underlying request, publications, issues, inserts, measurements, certificates, transactions, and tax records — implicated but not documented

Verbatim support

From the official Board memorandum:

The weekly shopper is not a component part of the newspaper publisher’s daily newspaper, even though essentially the same advertising matter and news and information is also included in the daily newspaper.

If the publisher has issued a resale certificate for the purchase of these items, it must report and pay use tax to the Board when it consumes these items in the printing of the weekly shopper.

The publisher is not liable for tax on its sales of advertising space to advertisers in the weekly shopper, since this is a service transaction only.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 385.0790
• Original supporting opinion: 385.0790 PDF

Original ruling text

State of California

Board of Equalization

Memorandum

385.0790

5/11/88

Newspaper publisher’s weekly shopper delivered to non-subscribers

A newspaper publisher publishes a daily newspaper which qualifies as a tax-exempt newspaper under Revenue and Taxation Code Section 6362. In addition, the same publisher also publishes a weekly shopper which consists primarily of advertising matter. In addition to the advertising printed in the weekly shopper, advertising inserts which are either printed by the publisher or received by the publisher from other printers or advertisers are included as part of the weekly shopper. The publisher distributes the weekly shopper free of charge only the persons who do not subscribe to the publisher’s daily newspaper. The majority of advertising matter and the majority of news and information included in the weekly shopper are also included as a component part of that day’s edition of the publisher’s daily newspaper. For purposes of determining whether or not the weekly shopper is an exempt newspaper, the shopper must independently qualify as exempt under the tests set out in Regulation 1590, including the requirement that the advertising portion cannot exceed 90% of the printed area in more than half of the issues of the weekly shopper during any 12-month period. The weekly shopper is not a component part of the newspaper publisher’s daily newspaper, even though essentially the same advertising matter and news and information is also included in the daily newspaper. If the weekly shopper does not independently qualify as an exempt newspaper under Regulation 1590, the newspaper publisher is the consumer of paper, ink, and other tangible personal property which becomes a component part of its taxable weekly shopper. If the publisher has issued a resale certificate for the purchase of these items, it must report and pay use tax to the Board when it consumes these items in the printing of the weekly shopper. The publisher is not liable for tax on its sales of advertising space to advertisers in the weekly shopper, since this is a service transaction only.

JGA