How did California tax city directories that a printer sold, gave away, or supplied as advertising premiums?

Plain-English summary

A redacted printer planned to sell some city directories, distribute others free, and give some as premiums to customers buying advertising over an unstated threshold.

Because city directories were not issued at average intervals no longer than three months, California did not treat them as exempt periodicals. Their retail sales were taxable tangible-property sales.

For directories given away free or as advertising premiums, the printer was the consumer of the materials and owed use tax if those materials had been acquired tax-free. Materials used in directories sold to customers were purchased for resale.

Counsel advised purchasing all materials under a resale certificate and then paying use tax on the portion withdrawn for giveaway or premium directories.

Source and live-annotation limits

The official PDF does not include the February 25 request, city directory, issue dates or schedule, advertising or threshold, customers, free-distribution or premium records, vendor or material records, prices, invoices, retail sales, resale certificate, allocation workpapers, returns, use-tax calculations or payments, audit, assessment, claim, appeal, or later outcome. The requester, directories, vendors, advertisers, customers, transactions, amounts, and year of the request are redacted or unidentified.

The source prints “permium,” “theron,” and “Cpmpliance.” The original-text section preserves those forms rather than silently correcting the official record.

The live annotation preserves the nonperiodical, taxable-sale, free/premium donor, and use-tax conclusions. It omits the February request and printer plan, three-month rationale, tangible-property characterization, material-level consumer rule and tax-free vendor condition, sold-copy resale treatment, recommended resale certificate and allocation method, missing records, redactions, and outcome limits.

What this means for you

Directory publishers, printers, advertisers, and tax professionals

Separate sold copies from promotional copies and support the material allocation. Preserve every directory, schedule, advertising and premium terms, material purchases, resale certificates, copy counts, invoices, sales and giveaway records, returns, and use-tax calculations.

Common questions

Q: Why were the city directories not exempt periodicals?

A: They were not issued at average intervals no longer than three months.

Q: How were sold copies treated?

A: Their sales were taxable, while the related materials were purchased for resale.

Q: How were free or premium copies treated?

A: The printer was the consumer of their materials and owed use tax if the materials had been obtained tax-free.

Q: What purchasing method did counsel recommend?

A: Buy all materials under a resale certificate, then report use tax for the portion used in giveaway copies.

Citations and references

• February 25 request — year, author, and copy absent
• Directories, advertising purchases, material purchases, sales, giveaways, premiums, certificates, allocation, and tax records — described or implicated but not documented

Verbatim support

From the official Associate Tax Counsel letter:

As to those given away free or as a permium, you are a consumer of the materials used therein and are subject to a use tax thereon, if obtained tax free from your vendors.

Therefore, you should purchase all of your materials under a resale certificate, and then, as to that portion thereof which is used in directories given away by you, you pay a use tax.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 385.0840
• Original supporting opinion: 385.0840 PDF

Original ruling text

385.0840

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

April 23, 1957

Attention: Mr. ---

Your letter of Feb. 25

Gentlemen:
You inquire as to the tax consequences of your plan to both sell and distribute free the city directories which you will print. Also, you state that you plan to give them as a premium to those who purchase advertising over a certain amount. Since city directories are not issued at average intervals not exceeding three months, they are not exempt as periodicals: and their sale would be subject to tax as a sale of tangible personal property. As to those given away free or as a permium, you are a consumer of the materials used therein and are subject to a use tax thereon, if obtained tax free from your vendors. However, as to the materials used in those directories sold by you, you are a purchaser for resale and not subject to a use tax theron. Therefore, you should purchase all of your materials under a resale certificate, and then, as to that portion thereof which is used in directories given away by you, you pay a use tax.

Very truly yours,

Bill Holden
Associate Tax Counsel

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cc: San Bernardino - Cpmpliance