Did four free customer and product-user newsletters qualify as periodicals under California's section 6362.7 exemption?

Plain-English summary

Staff Counsel answered a representative's absent September 8, 1993 letter about sales tax on sales of newsletters published by a redacted client. The representative sent a copy of each newsletter and said they were mailed regularly to the client's customers and product users. The quoted explanation describes monthly and quarterly publications sent free to clients, customers, and potential clients, but redactions prevent assigning a particular frequency to each title.

The representative argued that the publications met Regulation 1590 and that sales of the periodicals to the client were exempt. The opinion quoted section 6362.7. Under the quoted text, the exemption covered newspapers or periodicals distributed without charge and regularly issued at average intervals no longer than three months. It separately covered subscription periodicals delivered by mail or common carrier.

The quoted definition required a publication to appear at stated intervals at least four but no more than 60 times yearly; contain news or information of general or group interest; relate to earlier or later issues through literary continuity or similar subject matter; connect its issues through their articles; and maintain enough similarity of style and format to show a series. Printed sales messages, shopping guides, and publications whose advertising, including product publicity, exceeded 90 percent of printed area in more than half the issues during a 12-month period were excluded.

Counsel found that the four reviewed newsletters generally contained information of interest to users of the client's products. Product publicity did not exceed 90 percent of the reviewed issues' printed area. Counsel assumed that one-half or more of all issues also stayed within that limit during every 12-month period.

With that assumption, the opinion classified all four as periodicals under section 6362.7 and exempted the redacted sale made for distribution without charge.

Source and live-annotation limits

The official PDF does not include the September 8 request, any newsletter or issue, title-to-frequency mapping, articles or authors, style or format comparison, client or representative identity, customers or product users, mailing or free-distribution records, subscription terms, printer or seller, contracts, prices or invoices, sales or uses, complete 12-month advertising or product-publicity calculations, returns, exemption documentation, tax calculations or payments, audit, assessment, claim, appeal, or later outcome. The client, newsletter titles, products, recipients, transaction wording, and amounts are redacted or unidentified.

The source prints “users of you client's products,” “shopping ·guides,” “more one-half,” II (c), and subdivision (-), and redacts words from the final exemption sentence. The original-text section preserves those forms rather than silently repairing or completing the official record.

The live annotation identifies Candle Corporation and names Inside Operations, Candle Computer Report, Is People, and Interface. It says the free publications qualified in their September 1993 form and with the same distribution method. It omits the request, monthly/quarterly descriptions, customers, users and prospects, section 6362.7 and Regulation 1590, the statutory frequency, content, continuity, format and advertising tests, reviewed-issue evidence, yearlong assumption, source redactions and forms, missing records, and absent outcome.

What this means for you

Customer-newsletter publishers and tax professionals

Retain every issue, article and format comparison; document frequency, free mailing and the reader group served; and calculate advertising and product-publicity area across the full 12-month testing period. Keep printer contracts, invoices, sales, subscriptions, delivery records, returns, exemption documents, tax calculations, and payments.

Common questions

Q: Did all four reviewed newsletters qualify as periodicals?

A: Yes, subject to the stated advertising assumption.

Q: Could product publicity appear in them?

A: Yes, but a publication fell outside the quoted definition if advertising, including product publicity, exceeded 90 percent of printed area in more than half the issues during a 12-month period.

Q: Were the copies sold to readers?

A: The source says they were sent without charge to clients, customers, and potential clients.

Q: Did counsel review a complete 12-month run?

A: The source does not say so. Counsel reviewed the submitted newsletters and expressly assumed that at least half the issues stayed within the publicity limit during any 12-month period.

Q: Does the supporting opinion name the four titles?

A: No. The PDF redacts them; the live annotation supplies the Candle Corporation identity and titles.

Citations and references

• California Revenue and Taxation Code § 6362.7
• California Sales and Use Tax Regulation 1590
• September 8 request, newsletters and issues, mailing and distribution records, product-publicity calculations, sales, tax records, and outcome — described or implicated but not documented

Verbatim support

From the official Staff Counsel opinion:

Based on our review of the four newsletters you sent, we believe that the newsletters generally contain news or information of general interest to the users of you client's products.

The product publicity in the newsletters you sent does not exceed 90 percent of the printed area. We assume that is the case with one-half or more of the issues during any twelve-month period.

With that assumption, we believe that the four newsletters qualify as “periodicals” as defined in subdivision (-) of Section 6362.7.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 385.1415
• Original supporting opinion: 385.1415 PDF

Original ruling text

385.1415

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

November 29, 1993

This is in reply to your September 8, 1993 letter regarding the application of sales tax to sales of newsletters published by your client, ---. You sent a copy of each of the newsletters and explained that they are mailed to your client's customers and users of the client's products on a regular basis. You further explained:
--- are monthly publications sent free of charge to --- clients and customers and potential clients --- and --- are quarterly publications, again sent free of charge to clients/customers and potential clients.” You believe that the publications meet the criteria of Sales and Use Tax Regulation 1590, Newspapers and Periodicals, and the sale of the periodicals to your client is exempt from sales tax. The exemption applicable to the facts you present is Revenue and Taxation Code section 6362.7, which provides: "6362.7. There are exempted from the taxes imposed by this part, the gross receipts from the sale of, and the storage, use, or other consumption in this state, of tangible personal property which becomes an ingredient or component part of any newspaper or periodical that is distributed without charge and regularly issued at average intervals not exceeding three months, and any such newspaper or periodical. “(b) There are exempted from the taxes imposed by this part, the gross receipts from the sale of, and the storage, use, or other consumption in this state, of tangible personal property which becomes an ingredient or a component part of any periodical regularly issued at average intervals not exceeding three months, and any such periodical, that is sold by subscription and delivered by mail or common carrier. II (c) For purposes of this section, 'periodical' means any publication that appears at stated intervals at least four times per year, but not more than 60 times per year, each issue of which contains news or information of general interest to the public, or to some particular organization or group of persons. Each issue must bear a relationship to prior or subsequent issues with respect to continuity of literary

character or similarity of subject matter, and there must be some connection between the different issues of the series in the nature of the articles appearing in them. Each issue must be sufficiently similar in style and format to make it evident that it is one of a series. The term does not include printed sales messages, shopping ·guides, or other publications of which the advertising portion, including product publicity, exceeds 90 percent of the printed area of the entire issue in more one-half of the issues during any 12-month period.” Based on our review of the four newsletters you sent, we believe that the newsletters generally contain news or information of general interest to the users of you client's products. The product publicity in the newsletters you sent does not exceed 90 percent of the printed area. We assume that is the case with one-half or more of the issues during any twelve-month period. With that assumption, we believe that the four newsletters qualify as “periodicals” as defined in subdivision (-) of Section 6362.7. The sale of the periodicals --- --- the purpose of distribution without charge is exempt from tax. We hope this answers your questions; however, if you need further information, feel free to write again.

Very truly yours,

Ronald L. Dick
Staff Counsel

bc: District Administrator