Did Aileron qualify as a periodical because its quarterly subscription videotapes contained recurring magazine-style aviation segments?

Plain-English summary

Counsel for a redacted client requested a ruling that Aileron sales were not subject to sales or use tax. The Board received the letter May 23, 1986, with absent promotional material describing Aileron as a magazine in videotape format.

Aileron was sold only by subscription, with four quarterly issues. Each tape contained eight to 12 “topical articles” for pilots. The current and planned issues shared a format and similar subject matter. No ads had appeared yet, although future issues might carry them.

The requester claimed Aileron met Regulation 1590(a)(2) under section 6362, leaving only the delivery medium disputed. It cited Annotations 385.0600 and 385.0590 for the proposition that subject matter and article continuity, rather than medium, controlled. The response later calls the first annotation 385.0060, leaving the formal cross-reference unresolved.

Tax Counsel John Abbott rejected the claim. Aileron sales were taxable because videotapes and publications were distinct forms of tangible property under the historical analysis. Calling a tape a magazine and meeting quarterly, aviation-segment, content, format, or subscription characteristics did not make it a periodical.

The letter distinguished Annotation 385.0060's audio recordings of medical-journal extracts: a sound version of an exempt periodical could retain that status. Aileron was instead a videotape production.

The letter posed a hypothetical commercial-television lease, saying the producer would treat Aileron as a motion-picture production and the lease as nontaxable under section 6006(g). It rejected treating the same property as a motion picture when commercially leased and a periodical when sold by subscription for home viewing. Sections 6006(g)(7) and 6010(e)(7) separately made private-use videotape rentals taxable, further supporting distinct medium treatment. The stated exclusion applied regardless of content, distribution, or production frequency.

Source limits

The official PDF does not include the request, promotional material, any Aileron issue or tape, topical articles or aviation content, production records, subscribers or subscription agreement, prices or invoices, format or subject-matter comparison, advertising or plans, commercial-television or home-viewing transaction, motion-picture classification, lease, sale, return, tax calculations or payments, audit, assessment, claim, appeal, or outcome. Counsel, the client, subscribers, productions, transactions, and amounts are redacted or unidentified.

The source prints Regulation l590, “your client' sales,” “sale and use tax,” “not publication, not- withstanding,” “it this were,” and “Taxation Cede.” The original-text section preserves those forms rather than silently correcting the official record.

The live annotation preserves the continuing aviation video series, quarterly subscription-only distribution, eight-to-12 pilot-interest segments, format and subject similarity, medium distinction, noninterchangeability, and taxable subscriber sales. It omits the received request and promotional material, current/future issue and advertising facts, section 6362 and Regulation 1590(a)(2), 385.0600/385.0060 conflict and 385.0590, audio-journal distinction, commercial-lease/home-viewing hypothetical, sections 6006(g), 6006(g)(7), and 6010(e)(7), missing records, redactions, source forms, and absent outcome.

What this means for you

Video publishers and tax professionals

Classify the delivery medium independently from editorial form. Preserve every issue and tape, content and production records, schedule, format and subject continuity, advertising, subscriptions, distribution, commercial leases, home-viewing sales, invoices, returns, tax calculations, and payments.

Common questions

Q: Did Aileron's quarterly schedule qualify it?

A: No.

Q: Did magazine-style aviation segments qualify it?

A: No.

Q: Did the opinion treat audio and video identically?

A: No. It distinguished sound versions of exempt periodicals from videotapes.

Q: Which prior audio annotation did the request cite?

A: The request says 385.0600, while counsel's response says 385.0060. The source does not resolve the conflict.

Q: Did Aileron contain advertising?

A: None had appeared to date, but the requester said future issues might include it.

Citations and references

• Former California Revenue and Taxation Code §§ 6006(g), 6006(g)(7), 6010(e)(7), and 6362
• California Sales and Use Tax Regulation 1590(a)(2)
• California Sales and Use Tax Annotation 385.0600 in the request, 385.0060 in the response, and 385.0590 — number conflict preserved
• Request, promotional material, tapes and production, subscriptions and advertising, commercial leases, home-viewing sales, returns, tax records, and outcome — described or implicated but not documented

Verbatim support

From the official Tax Counsel ruling:

We think the common understanding is that video tapes on the one hand, and publications on the other hand, are distinct forms of tangible personal property, and not interchangeable depending on the classification the seller ascribes to them.

We cannot agree with the contention that the same tangible property constitutes both an exempt motion picture production if leased for commercial showings, and also an exempt “periodical” if sold on a subscription basis.

we do not think the periodicals exemption can be extended to include video tapes, regardless of their content, manner of distribution, or frequency of production.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 385.1275
• Original supporting opinion: 385.1275 PDF

Original ruling text

385.1275
STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

CONWAY H. COLLIS
First District, Los Angeles

1020 N STREET, SACRAMENTO, CALIFORNIA
(PO BOX 1799, SACRAMENTO, CALIFORNIA 95808)
(916) 445-8900

ERNEST J. DRONENBURG, JR
Second District, San Diego
WILLIAM M. BENNETT
Third District, Kentfield
RICHARD NEVINS
Fourth District, Pasadena
KENNETH CORY
Controller, Sacramento

916-445-6493

DOUGLAS D. BELL
Executive Secretary

July 22, 1986

Dear --In your letter to the Board’s legal staff, which we received May 23, 1986, you request our ruling that your client, --- --- is not liable for sales or use tax on its sales of “Aileron.” You also enclosed promotional material on “Aileron”, which you describe as a magazine in video tape format. You contend that “Aileron” is exempt from tax as a periodical under Revenue and Taxation Code Section 6362. You relate that “Aileron” is sold on a subscription basis only. Each subscriber receives four issues, one per quarter. Each issue consists of eight to twelve 'topical articles' on subjects of interest to pilots. Both the current issue and future issues currently in production have the same format and similar subject matter. To date, there are no advertisements included in these video tapes, although advertising may be included in future issues. Your view is that “Aileron” meets all the requirements of Sales and Use Tax Regulation l590 (a) (2) to qualify as an exempt periodical, and the only issue in question deals with the medium through which the magazine is produced. You contend that two sales tax counsel rulings (annotations), specifically, no. 385.0600 and no. 385.0590, are both authority for the principle that the deciding factor in determining whether the requirements of Regulation 1590 are met is not the medium, but rather the topical nature of the subject matter and the continuity of the nature of the articles appearing in the issues. Opinion: We cannot agree with your contention that “Aileron” qualifies as an exempt periodical. Instead, our opinion is that your client' sales of “Aileron” are subject to sale and use tax because “Aileron” is a video tape, not publication, not- withstanding that “Aileron” describes itself as a “magazine.”

You are correct that, in annotation 385.0060, the legal staff's opinion was that tape recordings of material extracted from medical journals were held to be exempt periodicals. In that case, we regarded the sound version of a periodical as also qualifying as a periodical, and the fact that the publication was recorded on audio tape, not paper, did not make the publication taxable. However, we feel it goes beyond the legislative intent of Section 6362 to regard a video tape production as an exempt periodical merely because it calls itself a magazine, is sold on a quarterly basis, and contains several segments per tape on the general subject of aviation. We think the common understanding is that video tapes on the one hand, and publications on the other hand, are distinct forms of tangible personal property, and not interchangeable depending on the classification the seller ascribes to them. For example, suppose a videotape series such as “Aileron” were produced and leased for commercial television showings, rather than sold for home viewing. Undoubtedly, it this were the case, the producer would successfully contend that each production of “Aileron” qualified as a motion picture production, and would constitute nontaxable leases under Revenue and Taxation Cede Section 6006(g). We cannot agree with the contention that the same tangible property constitutes both an exempt motion picture production if leased for commercial showings, and also an exempt “periodical” if sold on a subscription basis. Furthermore, the legislature has specifically provided that leases of video tapes are subject to tax, when rented for private use only. Revenue and Taxation Code Sections 6006(g) (7) and 6010(e) (7). Our view is that this is further indication of the legislative intent to treat video tapes as a separate and distinct form of tangible property without regard to whether its content might resemble the format of a magazine in some respects. Thus, we cannot agree with your point of view that the medium makes no difference in determining whether tangible property may qualify as exempt periodical. While our opinion is that audio tapes may qualify as exempt, at least if they are the sound version of exempt periodicals, we do not think the periodicals exemption can be extended to include video tapes, regardless of their content, manner of distribution, or frequency of production. Please feel free to contact me if you have any further questions or comments about this letter.

Sincerely,

John Abbott
Tax Counsel

JA:hb
bc: Culver City District Office