Did the Fresno Pennysaver qualify as an exempt periodical despite being a shopping guide, and which related production charges were exempt?

Plain-English summary

The redacted publisher's November 5, 1983 letter requested reconsideration of a November 2 Board letter saying Fresno Pennysaver did not qualify as a tax-exempt periodical. The publisher submitted the absent October 19, 1983 issue for review.

Although it was a shopping guide, the publication also contained current television listings and news articles about local community and sporting events. Its advertising did not exceed 90% of total printed area in more than half the issues during a 12-month period, and it was issued often enough to meet the rule.

For the exempt publication, ink, staples, paper, other physically incorporated materials, and printing charges were exempt. Separately itemized artwork, photographs, and printing aids were exempt when the printer retained ownership, but taxable when the publisher acquired ownership.

Counsel also said tax did not apply to charges made to subscribers or other purchasers of the publication. Ownership, not physical delivery alone, controlled production aids: tax applied if the publisher acquired them even when the printer kept them as the publisher's property, because they were not physically incorporated into the publication.

Later authority and source limits

A February 5, 2002 official staff email published with Annotation 385.0920 warns that, under then-current section 6362.7 and Regulation 1590, periodicals were no longer exempt unless sold by subscription and delivered by mail or common carrier, or covered by another exemption such as nonprofit distribution. The live annotation separately flags “Subsequent statutory change.” The 1984 opinion does not establish current exemption treatment.

The official 385.1642 PDF does not include the November 5 request, November 2 prior letter, October 19 issue, any other issue, television listings or articles, publication and delivery schedule, advertising measurements or 12-month calculations, publisher, printer, subscriber or customer identity, ink, staples, paper, other materials, artwork, photographs or printing aids, ownership or retention agreements, prices or invoices, sales or uses, returns, exemption documentation, tax calculations or payments, audit, assessment, claim, appeal, or later outcome. The parties, readers, production items, transactions, and amounts are redacted or unidentified.

The source prints 0ctober with zero, program1istings with one, and the staff initials CJB although it signs Charles J. Graziano. The original-text section preserves those forms. The live annotation preserves the frequency, television listings, community/sports articles, advertising formula, date, and exempt-periodical result and flags later change. It omits the reconsideration and prior letter, reviewed issue, shopping-guide label, section 6362(a) and Regulation 1590, production materials and printing, ownership rule, subscriber sales, missing records, redactions, source forms, and absent outcome.

What this means for you

Shopping-guide publishers and tax professionals

A publication dominated by ads could still qualify under the historical test if it contained qualifying current information, met the frequency rule, and stayed within the advertising threshold. Preserve every issue and advertising calculation, publication and delivery schedules, content, production materials and ownership records, printer contracts, invoices and sales, returns, exemption documents, tax calculations, and payments.

Common questions

Q: Did being a shopping guide automatically disqualify the Pennysaver?

A: No.

Q: What nonadvertising content mattered?

A: Current television listings and articles about local community and sporting events.

Q: Were printing and incorporated materials taxable?

A: No, for the exempt periodical described.

Q: When were artwork and printing aids taxable?

A: When the publisher acquired ownership, whether the items were delivered or retained by the printer as the publisher's property.

Q: Did this opinion reverse an earlier answer?

A: Yes. It reconsidered an absent November 2, 1983 letter after reviewing the October 19 issue.

Q: Did tax apply to subscriber charges under this historical opinion?

A: No.

Citations and references

• Former California Revenue and Taxation Code § 6362(a)
• California Sales and Use Tax Regulation 1590
• California Revenue and Taxation Code § 6362.7 and Regulation 1590 — discussed in the February 5, 2002 staff email published with Annotation 385.0920
• Reconsideration request, prior letter, publication and issues, production and ownership records, sales, tax records, and outcome — described or implicated but not documented

Verbatim support

From the official Tax Counsel reconsideration opinion:

We have further considered this matter and now conclude that the Fresno Pennysaver qualifies as a tax exempt periodical under Regulation 1590.

Although your publication is a shopping guide, the advertising portion does not exceed 90 percent of printed area of the entire issue in more than one-half of the issues during a 12-month period.

Charges for artwork, photographs, and printing aids used in the production of your exempt periodicals are taxable if you acquire ownership of these items, whether these items are delivered to you or retained by the printer as your property.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 385.1642
• Original supporting opinion: 385.1642 PDF

Original ruling text

385.1642

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

Reg. 1590
Fresno Pennysaver qualifies as an exempt periodical.

916 / 445 -6493

January 18, 1984

No Permit
Dear --This is in reply to your letter of November 5, 1983. You request that we review our decision expressed in our November 2, 1983 letter to you that the Fresno Pennysaver does not qualify as a tax exempt periodical. You have enclosed a copy of the 0ctober 19, 1983 issue of this publication for our review. We have further considered this matter and now conclude that the Fresno Pennysaver qualifies as a tax exempt periodical under Regulation 1590. It appears that in addition to the advertising portion, this publication contains current television program1istings and news articles on local community and sporting events. Although your publication is a shopping guide, the advertising portion does not exceed 90 percent of printed area of the entire issue in more than one-half of the issues during a 12-month period. Therefore, your publication qualifies for exemption from sales tax under Revenue and Taxation Code Section 6362 (a) and Sales and Use Tax Regulation 1590, as a periodical regularly issued at average intervals not exceeding three months. Tax does not apply to ink, staples, paper, or other materials physically incorporated into your publication. Tax does not apply to charges made to you for printing the publication. Tax does not apply to separately itemized charges for artwork, photographs, and printing aids used in the production of periodicals if ownership of the items is retained by the printer. Furthermore, tax does not apply to charges made to subscribers or other persons who purchase your publication. Charges for artwork, photographs, and printing aids used in the production of your exempt periodicals are taxable if you acquire ownership of these items, whether these items are

delivered to you or retained by the printer as your property. Tax applies because these items are not physically incorporated into the exempt publication. If you have any further questions concerning this matter, please write this office.

Very truly yours,

Charles J. Graziano
Tax Counsel

CJB: ba