Were paid and free distributions of The Catholic Herald and El Heraldo Catolico exempt when readers paid suggested annual donations?

Plain-English summary

A redacted nonprofit organization produced an English newspaper and a Spanish newspaper for distribution through a redacted area. Their combined circulation was about 14,000. The suggested annual donation was $15 for the English paper and $10 for the Spanish paper; about half the combined circulation was paid. The Roman Catholic Bishop of Sacramento, described as the publisher's umbrella corporation, subsidized about one-third of operating expenses.

After the July 14, 1994 request, the publisher sent three consecutive issues of each publication. Senior Tax Counsel reviewed The Catholic Herald and El Heraldo Catolico and concluded that both met the quoted section 6362.7 definition of a periodical.

The publisher had received a printed-sales-message exemption certificate from its printer. Counsel explained that section 6379.5 applied to catalogs, letters, circulars, brochures, and pamphlets consisting substantially of sales messages for goods or services—not newspapers and periodicals—so that form did not apply here.

Section 6362.7 instead governed the presented facts. The opinion quoted its free-distribution exemption, subscription-and-delivery exemption, and periodical definition, including frequency, content, continuity, format, and advertising limits.

Board legal staff had previously treated an organization's transfer of tangible personal property for a suggested minimum donation as a sale under Annotation 495.0370. Even so, sales of subscriptions to both publications were exempt under section 6362.7(b) when delivered by mail or common carrier. The publisher could issue its printer Certificate A from subdivision (c) of the enclosed proposed Regulation 1590.

Copies distributed without charge were exempt under section 6362.7(a).

Source and live-annotation limits

The official PDF does not include the July 14 request, any of the six reviewed issues, articles or authors, style or format comparison, publisher identity, distribution area, circulation records, subscriber list, donation requests or receipts, subsidy or expense records, subscription terms, mail or common-carrier proof, printer identity or agreement, the received printed-sales-message certificate, proposed Regulation 1590 enclosure or Certificate A, prices or invoices, sales or uses, returns, exemption documentation, tax calculations or payments, audit, assessment, claim, appeal, or later outcome. The publisher, distribution area, request recipient, printer, subscribers, transactions, and tax amounts are redacted or unidentified.

The first paragraph redacts the Spanish title, but the analysis later identifies El Heraldo Catolico. The source prints english and spanish in lowercase and begins “Dear: --This” without a line break. The original-text section preserves those forms rather than silently normalizing the official record.

The live annotation identifies The Catholic Herald and El Heraldo Catolico as different-language editions of one publication, says they were sold only by subscription and delivered by mail, and calls both exempt periodicals. The supporting opinion describes both paid and free circulation and does not itself use the “same publication” formulation. The live entry omits the request, nonprofit status, 14,000 circulation, donation amounts, paid share, subsidy, reviewed issues, printed-sales-message form, sections 6362.7 and 6379.5, Annotation 495.0370, proposed Regulation 1590 and Certificate A, free-copy exemption, missing records, redactions, source forms, and absent outcome.

What this means for you

Nonprofit publishers and tax professionals

Treat suggested minimum donations as potential consideration. Retain consecutive issues proving periodical status; separate paid and free circulation; document subscription, mail and common-carrier delivery; and use the certificate that matches the claimed newspaper-and-periodical exemption. Keep donation, subsidy, printer, invoice, sales, return, exemption, and tax-payment records.

Common questions

Q: Did both language editions qualify as periodicals?

A: Yes.

Q: Were suggested donations treated as sales?

A: Yes.

Q: Were mailed subscription copies taxable?

A: No.

Q: Did the printed-sales-message certificate apply?

A: No. Counsel said section 6379.5 did not apply to newspaper and periodical sales.

Q: What certificate did counsel identify instead?

A: Certificate A in subdivision (c) of the enclosed proposed Regulation 1590, which is not included in the official PDF.

Q: Does the source call the two titles different-language editions of one publication?

A: No. That description appears in the live annotation; the opinion calls them two publications and separately identifies English and Spanish papers.

Q: Were copies distributed without charge taxable?

A: No.

Citations and references

• California Revenue and Taxation Code §§ 6362.7 and 6379.5
• Proposed California Sales and Use Tax Regulation 1590(c)
• California Sales and Use Tax Annotation 495.0370
• July 14 request, reviewed issues, circulation, donations, subsidy, subscriptions, delivery, printer documents, sales, tax records, and outcome — described or implicated but not documented

Verbatim support

From the official Senior Tax Counsel opinion:

Based on our review of the copies of El Heraldo Catolico and The Catholic Herald, we believe both publications qualify as "periodicals" as defined above.

The Board's legal staff has previously taken the position that, when an organization provides tangible personal property for a suggested minimum donation, the organization thereby makes a sale of the property for purposes of the Sales and Use Tax Law.

When the --- sells subscriptions to The Catholic Herald and El Heraldo Catolico by subscription and delivers the publications by mail or common carrier, the sale is exempt from sales tax under subdivision (b) of Section 6362.7.

When you distribute copies of the periodicals without charge, the distribution is exempt from sales and use tax pursuant to subdivision (a) of Revenue and Taxation Code section 6362.7.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 385.1417
• Original supporting opinion: 385.1417 PDF

Original ruling text

385.1417
STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001
TELEPHONE (916) 920 - 7445

MEMBER
First District
BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG,
JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles

•

August 22, 1994

GRAY DAVIS
Controller, Sacramento

BURTON W. OLIVER
Executive Director

Dear: --This is in reply to your July 14, 1994 letter regarding the application of sales tax to charges for the Catholic Herald and --- ---, two publications of the --- of ---. You provided the following facts: "We are a non-profit organization which produces two newspapers for distribution throughout the ---. We have a combined circulation of about 14,000. The suggested donation for the english paper is $15/year and for the spanish paper is $10/year. About 50% of our combined circulation is paid. We receive a subsidy from our umbrella corporation, the Roman Catholic Bishop of Sacramento, which funds about one-third of our operating expenses." You later sent a copy of three consecutive issues of both publications. The copy of the form you sent us that you note you received from the printer, is an exemption certificate for the sale of "printed sales messages". That exemption certificate pertains to an exemption from sales and use tax for the sale and use of catalogs, letters, circulars, brochures, and pamphlets consisting substantially of printed sales messages for goods and services. (Rev. & Tax Code section 6379.5.) That exemption is not applicable to sales of newspapers and periodicals. Rather, the exemption applicable to the facts you present is provided by Revenue and Taxation Code section 6362.7, which provides: "(a) 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. "(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 than one-half of the issues during any 12-month period." Based on our review of the copies of El Heraldo Catolico and The Catholic Herald, we believe both publications qualify as "periodicals" as defined above. The Board's legal staff has previously taken the position that, when an organization provides tangible personal property for a suggested minimum donation, the organization thereby makes a sale of the property for purposes of the Sales and Use Tax Law. (Bus. Tax Law Guide Anno. 495.0370.) When the --- sells subscriptions to The Catholic Herald and El Heraldo Catolico by subscription and delivers the publications by mail or common carrier, the sale is exempt from sales tax under subdivision (b) of Section 6362.7. You may issue an exemption certificate to your printer in the form provided as Certificate A of subdivision (c) of the enclosed copy of proposed Sales and Use Tax Regulation 1590, Newspapers and Periodicals. When you distribute copies of the periodicals without charge, the distribution is exempt from sales and use tax pursuant to subdivision (a) of Revenue and Taxation Code section 6362.7. We hope this answers your questions; however, if you need further information, feel free to write again.

Very truly yours,

Ronald L. Dick
Senior Tax Counsel

RLD: plh
Enclosure - Proposed Regulation 1590
cc: Sacramento District Administrator - KH