Did a quarterly residential real estate and insurance newsletter qualify as an exempt periodical, and which production charges were exempt?

Plain-English summary

A redacted publisher asked whether its Residential Real Estate and Insurance Newsletter qualified as an exempt periodical. Tax Counsel reviewed the absent March 1983 issue. The publication appeared four times annually and contained residential-real-estate and insurance articles.

California said it qualified as an exempt periodical under former Revenue and Taxation Code section 6362 and Regulation 1590, provided advertising and product publicity did not exceed 90% of the printed area in more than half the issues during a 12-month period.

For the exempt periodical described, tax did not apply to ink, staples, paper, other physically incorporated materials, printing charges, or charges to subscribers and other purchasers.

The source's next sentence about separately itemized artwork, photographs, and printing aids is grammatically incomplete: it says they were “used in the retained by the printer.” The following sentence is clear that those items were taxable if the publisher acquired ownership, whether delivered to it or retained by the printer as its property.

Later authority and source limits

The live annotation carries a “Subsequent statutory changes” note. 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 1984 opinion does not establish current exemption treatment.

The official 385.1878 PDF does not include the January 24 request, March 1983 newsletter, any other issue, articles, publication records, advertising or product-publicity measurements, printing contract, ink, staples, paper or other materials, artwork, photographs or printing aids, invoices, ownership or retention records, subscribers or other purchasers, sales or uses, returns, exemption documentation, tax calculations or payments, audit, assessment, claim, appeal, identified subsequent statutory change, or later outcome. The publisher, printer, readers, transactions, quantities, prices, advertising percentages, and tax amounts are redacted or unidentified.

The source prints more that one-half of the issue, Tax does not apply separately itemized, used in the retained by the printer, and theses items. The original-text section preserves those forms. Because the artwork sentence is incomplete, this page does not silently supply its missing words.

The live entry preserves the title, four-times-yearly schedule, residential-real-estate and insurance topics, periodical result, date, and later-change warning. It omits the request and counsel, redacted publisher, March 1983 issue, conditional advertising test, former section 6362 and Regulation 1590, treatment of incorporated materials and printing, subscriber charges, garbled artwork sentence, publisher-ownership rule, missing records, redactions, source forms, and absent outcome.

What this means for you

Newsletter publishers and tax professionals

Preserve every issue, article, publication schedule, advertising and product-publicity measurement, printing contract, incorporated-material record, production-property invoice, ownership and retention record, subscriber agreement, sale, return, exemption document, tax calculation, and payment. Resolve current law and contract ownership rather than relying on the incomplete 1984 artwork sentence.

Common questions

Q: Was the quarterly newsletter exempt?

A: Yes, provided it stayed within Regulation 1590's advertising threshold.

Q: Were printing charges taxable?

A: No, for the exempt periodical described.

Q: Were ink, staples, and paper taxable?

A: No, because they were physically incorporated into the exempt publication.

Q: Did tax apply to charges to subscribers or other purchasers?

A: The opinion said it did not for the exempt publication described.

Q: When were artwork and printing aids taxable?

A: The opinion clearly says they were taxable when the publisher acquired ownership, whether delivered to it or retained by the printer as its property. Its preceding nontaxable-treatment sentence is incomplete.

Citations and references

• Former California Revenue and Taxation Code § 6362
• California Sales and Use Tax Regulation 1590(a)(2) and (b)(1)
• California Revenue and Taxation Code § 6362.7 and Regulation 1590 — discussed in the February 5, 2002 staff email published with Annotation 385.0920
• January 24 request, March 1983 newsletter, advertising and production materials, sales, tax records, and outcome — described or implicated but not documented

Verbatim support

From the official Tax Counsel opinion:

In our view, the “Residential Real Estate and Insurance Newsletter” published by --- --- -- qualifies for exemption from sales tax pursuant to Revenue and Taxation Code Section 6362 and Regulation 1590 as a periodical regularly issued at average intervals not exceeding three months provided the advertising portion, including product publicity, of this publication does not exceed 90 percent of the printed area of the entire issue in more that one-half of the issue during any 12-month period.

Tax does not apply separately itemized artwork, photographs, and printing aids used in the retained by the printer.

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

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 385.1878
• Original supporting opinion: 385.1878 PDF

Original ruling text

385.1878

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

(916) 445-6493

March 7, 1984

Dear Mr. --This is in reply to your letter of January 24, 1984. You ask whether the “Residential Real Estate and Insurance Newsletter” published by --- --- --- qualifies as an exempt periodical. We have examined the March 1983 copy of this publication which you enclosed with your letter. This publication is issued at stated intervals four times annually, and it contains articles on residential real estate and insurance topics. As provided under Section (b) (1) of Sales and Use Tax Regulation 1590, tax does not apply to the sale of any “periodical,” nor to the sale of any tangible personal property which becomes an ingredient or component part of any “periodical” regularly issued at average intervals not exceeding three months. The term “periodical” is limited to those publications which appear at stated intervals, each issue which contains news and information of general interest to the public, or to some particular organization, or group of persons. (Regulation 1590 (a) (2). ) The term “periodical” does not include any publication in 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. In our view, the “Residential Real Estate and Insurance Newsletter” published by --- --- -- qualifies for exemption from sales tax pursuant to Revenue and Taxation Code Section 6362 and Regulation 1590 as a periodical regularly issued at average intervals not exceeding three months provided the advertising portion, including product publicity, of this publication does not exceed 90 percent of the printed area of the entire issue in more that one-half of the issue during any 12-month period. As an exempt periodical, tax does not apply to ink, staples, paper, or other materials physically incorporated into your publication. Tax does not apply to the charges made to you for

printing this publication. Tax does not apply separately itemized artwork, photographs, and printing aids used in the retained by the printer. Furthermore, tax does not apply to the 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 periodical are taxable if you acquire ownership to theses items, whether these items are delivered to you or are 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

CJG: ba