Did a corporation need a seller's permit when its container and label sales were exempt, and how did California treat the advertising material it gave away?

Plain-English summary

A corporation sold packaging materials and labels to distributors of the source's Northwester brand chicken-pheasant. Later in the same paragraph the opinion calls it Norwester, without resolving the name. The corporation charged cost plus a one-cent override for each bird packaged, placed the override in a fund used primarily for advertising, and distributed some advertising material to processors and distributors without another charge. The letter does not supply the inquiry, sales agreements, invoices, customer records or fund records.

Assistant Counsel W. W. Mangels treated the corporation as selling the packaging and labels but consuming the advertising pamphlets, display material and other advertising matter. Under former Ruling 79 as the opinion described it, a person selling tangible personal property of a kind normally subject to sales tax needed a seller's permit even when substantially all or all sales were exempt under former Ruling 49.

The described former Ruling 49 exemption covered nonreturnable containers sold without contents to purchasers who filled them and sold the contents with the containers. It also covered labels that purchasers affixed to property and sold with that property. If the corporation made only those exempt sales, it still had to obtain a permit, include the sales on line 1 of the then-current return and deduct them on line 11.

Because the corporation apparently sold the containers, other packaging and labels at cost plus the override, it could buy those items ex tax by giving vendors resale certificates under former Ruling 68's conditions. It did not resell the advertising material it distributed without charge; it consumed that property and had to buy it tax-paid, with the vendors' sales to it treated as retail sales.

The source says copies of Rulings 49, 68 and 79 were enclosed, but CDTFA's two-page PDF does not include them. It also says a seller's-permit application and sample return were enclosed and directed submission to the Board's former Room 148 Sacramento office, but neither enclosure, a completed application, a permit, a filed return nor a later audit or outcome is supplied.

Source posture and later use

The live 410.0280 annotation, in the 2026 revision of the Business Taxes Law Guide, retains the permit rule and distinguishes property exempt because of a particular use from property exempt by its nature. It omits the chicken-pheasant business, one-cent override and advertising fund, free advertising matter, consumed-property treatment, former Rulings 49, 68 and 79, conditional container and label facts, resale certificates, historical return lines, missing enclosures and absence of a filing or audit outcome.

The later November 9, 1971 opinion supporting Annotation 410.0250 cited 410.0280 while concluding that a medicine seller needed a permit even if every medicine sale was exempt. A July 16, 1993 calligrapher opinion supporting Annotation 515.0002.820 cited 410.0250, 410.0280 and 410.0300 for requiring a permit despite exempt public-display art sales, while distinguishing all-interstate sales. Those later opinions concern different property and do not supply this source's missing enclosures or transaction outcome.

CDTFA's Annotated Legal Opinions collection says the letters are summarized as annotations and that statutory law controls whenever a statute and annotation conflict. The official two-page 410.0280 PDF has a clean native text layer and one small page-1 stencil, so no OCR was required. It prints distributers, sol, Northwester and Norwester; those visible defects remain verbatim below. Two fresh direct downloads of both the PDF and live annotation were byte-identical, and duplicate default PDF text extractions matched. The original-text section below remains byte-identical to its committed version and matches the fresh official extraction after removal of only the extractor's terminal newline and form feed.

What this means for you

Packaging sellers, label suppliers, and tax professionals

Separate resale inventory from promotional property the business consumes, and document every condition of a use-based exemption. Under this historical opinion, exempt sales still carried permit and reporting duties, while giveaway advertising material was a taxable purchase by the corporation. Check current container, label, resale-certificate, promotional-material, permit and return rules rather than using the 1952 line numbers or former rulings.

Common questions

Q: Did exempt container and label sales require a permit?

A: Yes. The opinion said a seller of property normally subject to sales tax still needed a permit when the exemption arose from the property's particular use.

Q: Which container and label sales did the opinion describe as exempt?

A: Nonreturnable containers sold empty to purchasers who filled and resold them with their contents, and labels affixed to property and sold with that property. The missing former Ruling 49 supplied the underlying conditions.

Q: Could the seller buy packaging inventory for resale?

A: Apparently yes. Because it sold the packaging and labels at cost plus the override, it could give vendors resale certificates under the conditions of missing former Ruling 68.

Q: How were free advertising materials treated?

A: The corporation consumed them rather than reselling them and had to purchase them tax-paid; sales of those materials to the corporation were retail sales.

Q: How were exempt sales reported?

A: The 1952 opinion directed inclusion on line 1 and deduction on line 11 of the then-current return. The sample return is absent, and those instructions should not be assumed current.

Q: Did the source show that the corporation obtained a permit or filed the return?

A: No. It says an application and sample return were enclosed, but it supplies neither the enclosures nor any completed filing, permit, audit or outcome.

Citations and references

• Former California Sales and Use Tax Ruling 49 — described as supplying the nonreturnable-container and label exemptions; stated enclosure absent
• Former California Sales and Use Tax Ruling 68 — described as supplying resale-certificate conditions; stated enclosure absent
• Former California Sales and Use Tax Ruling 79 — described as supplying the permit rule; stated enclosure absent
• Sales and Use Tax Annotations 410.0250 (November 9, 1971) and 515.0002.820 (July 16, 1993) — later citations in different factual settings
• Inquiry; sales agreements; invoices; customer and fund records; advertising materials; resale certificates; permit application; sample and filed returns; permit; audit; and outcome — described or implicated but not included

Verbatim support

From the official May 27, 1952 Assistant Counsel opinion:

It is our opinion that, for sales tax purposes, the corporation should be regarded as selling the packaging material and labels and consuming the advertising pamphlets.

Accordingly, if your client only makes such exempt sales he is required to hold a seller’s permit and include such sales on Line 1 of his sales and use tax return but may deduct such sales on Line 11 of the return.

Inasmuch as it appears that your client is not, in effect, reselling but is consuming advertising display material and other advertising matter, your client should purchase such material on a tax-paid basis, sales to him being at retail.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 410.0280
• Original supporting opinion: 410.0280 PDF
• Later citations: 410.0250 PDF and 515.0002.820 PDF

Original ruling text

STATE OF CALIFORNIA

410.0280

STATE BOARD OF EQUALIZATION

May 27, 1952

Attention Mr. X--------------,
Gentlemen:
This in reply to your inquiry concerning the application of sales tax to the activities of X-------------------------. We regret this tardy reply but we apparently mislaid your letter. As we understand the facts this corporation sells packaging materials and labels to distributers of “Northwester” brand chicken-pheasant. Those materials are sol at cost plus a 1 cent override on each chicken-pheasant packaged. The 1 cent override is placed in a fund which is used primarily for advertising. It distributes some advertising material to the “Norwester” processors and distributors without additional charge. It is our opinion that, for sales tax purposes, the corporation should be regarded as selling the packaging material and labels and consuming the advertising pamphlets. Pursuant to Sales and Use Tax Ruling 79, copy enclosed, persons engaged in the business of selling tangible personal property of a kind normally subject to the sales tax are required to hold a seller’s permit even though substantially all or all of their sales are otherwise exempt as a result of Ruling 49, copy enclosed. Sales of nonreturnable containers when sold without the contents to persons who place the contents in the container and sell the contents together with the container are exempt pursuant to Ruling

49. Also as shown by that ruling, the tax does not apply to sales of labels if the purchaser
    affixes them to property to be sold and sells them along with such property. Accordingly, if your client only makes such exempt sales he is required to hold a seller’s permit and include such sales on Line 1 of his sales and use tax return but may deduct such sales on Line 11 of the return. As we understand the facts, the containers, other packaging material and labels are being sold at cost plus the 1 cent override. Inasmuch as your client is apparently selling these items he may purchase them ex tax by providing his vendor with resale certificates under the conditions and pursuant to the provisions of Ruling 68, copy enclosed. Inasmuch as it appears that your client is not, in effect, reselling but is consuming advertising display material and other advertising matter, your client should purchase such material on a tax-paid basis, sales to him being at retail.

We enclose an application for a seller’s permit and a sample copy of a sales and use tax return. When completed, the application should be submitted to our Sacramento office, Room 148, 1020 N street. If you have any further questions we shall be happy to endeavor to answer them and we assure you that we shall answer more promptly. Very truly yours,

W.W. Mangels
Assistant Counsel
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