Was the full charge taxable when a word-processing business used a customer's hard-copy outline to produce color overhead transparencies?

Plain-English summary

A word-processing and database business received a customer's hard-copy outline notes and used them to produce color overhead transparencies, with or without cardboard frames.

The letter treated the physical transparencies as the customer's true object. The entire charge was therefore subject to sales tax, and it drew no different result for transparencies placed in cardboard frames.

The complete source answered four other word-processing patterns:

• Transcribing an audio tape and supplying one copy was a nontaxable service. Additional copies were taxable, including form letters that differed only enough to personalize essentially the same letter. When service and copying formed one transaction, the entire gross receipts were taxable without a deduction for earlier services.
• Transcribing hard-copy notes had the same result: one original was nontaxable, while additional copies were taxable regardless of how the original or copies were produced.
• A second hard-copy-outline question received the same answer as the first two transcription scenarios.
• Producing individual boilerplate letters from a mailing list on computer disk was taxable because the true object was multiple copies of essentially the same letter.

Parallel annotation and source posture

CDTFA publishes the same December 21, 1992 letter under Annotation 515.0003, in the Service Enterprises collection. A fresh extraction of that official PDF differs from the 420.0348 extraction only where the two-page letter prints its formal annotation ID: 515.0003 instead of 420.0348 on pages one and two. Both live annotations use the same one-sentence transparency holding and date. This page preserves 420.0348's separately published identity and exact source URL rather than collapsing it into the parallel annotation.

The current live 420.0348 annotation preserves the hard-copy outline, color transparency, true-object, total-charge and December 21, 1992 points. It omits the possible cardboard frames, word-processing/database business, missing October 1 inquiry, other four fact patterns, one-copy service treatment, full-receipts rule for combined service and copies, personalized-form-letter rule, cited Annotation 430.0230, missing enclosures and absence of an applied transaction or outcome. The parallel 515.0003 live page has the same omissions.

The source says the requester already had Regulations 1502 and 1504 and that Counsel enclosed Regulation 1502.1; the closing enclosure line lists Annotation 430.0230, Regulation 1502.1(a). Neither enclosure appears in either two-page PDF. The current live Annotation 430.0230 addresses a different 1982 word-processing letter with originals, carbon copies, photocopies, personalized letters, manuscripts, wills, mailing lists, labels and reproduction copy. Its distinct facts are not imported into this 1992 request.

The PDFs supply no October 1 inquiry, requester identity, seller's permit, audio tape, hard-copy notes or outline, mailing-list disk, boilerplate letter, transcription, transparency, cardboard frame, original or extra copy, copy count, bundled charge, invoice, contract, tax return, audit, assessment or later outcome. Counsel's five answers therefore classify the described scenarios; they do not establish that a completed taxpayer transaction matched them.

CDTFA's Annotated Legal Opinions collection says the source letters are summarized as annotations and that statutory law controls whenever a statute and annotation conflict. The official 420.0348 PDF has a clean native text layer and one small page-one letterhead image rather than scanned text, so no OCR was required. Both fresh direct primary-PDF downloads and both live-page downloads were byte-identical, duplicate default PDF text extractions matched, and the original-text section remains byte-identical to its committed version and the fresh extraction after removal of only the extractor's terminal newline and form feed.

What this means for you

Document what the customer is buying, how many physical outputs are promised, whether variations are merely personalization, and whether transcription and copying are one transaction. Under this letter, one original document received service treatment, while finished transparencies and runs of additional or boilerplate copies were taxable physical output.

Common questions

Q: Did a cardboard frame change the transparency result?

A: No separate treatment was stated. Counsel found the transparencies to be the true object whether or not each was framed.

Q: Was one transcription taxable?

A: No under the stated audio-tape and hard-copy scenarios when the business supplied only one original document.

Q: What happened when the customer ordered extra copies?

A: The letter treated them as taxable. If the service and copying were one transaction, the entire receipts were taxable without deducting the earlier service work.

Q: Did slight personalization make boilerplate letters separate originals?

A: No. The source treated them as multiple copies of essentially the same letter.

Q: Why are there two annotation IDs for this letter?

A: CDTFA separately publishes the same opinion under the Photographers collection as 420.0348 and the Service Enterprises collection as 515.0003; the PDFs change only the printed IDs.

Citations and references

• California Sales and Use Tax Regulations 1502, 1502.1(a), and 1504 — identified in the letter
• Business Taxes Law Guide Annotation 430.0230 — cited and described as enclosed; the current distinct live authority was reviewed
• Business Taxes Law Guide Annotation 515.0003 — parallel publication of the same December 21, 1992 letter under a different formal ID
• October 1 inquiry, identity, materials, outputs, charges, agreements, invoices, tax filings and outcomes — implicated but absent

Verbatim support

From the official December 21, 1992 Tax Counsel letter:

This work is tax exempt as a service so long as you provide only one copy to your client.

If the services and the copying occur as one transaction, the tax would apply to the gross receipts of the entire transaction with no deduction for the services performed before the copies are printed out.

Making additional copies, without regard to how the original was prepared, and without regard to the type of equipment used to produce the copies, makes the transaction taxable.

Where the true object of the transaction is the physical output produced, sales tax will apply.

The true object of this transaction is the production of multiple copies of what is essentially the same letter.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Live annotation: Annotation 420.0348
• Original supporting opinion: 420.0348 PDF
• Parallel live annotation: Annotation 515.0003

Original ruling text

420.0348

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

WILLIAM M. BENNETT
First District, Kentfield

1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-2641

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

December 21, 1992

GRAY DAVIS
Controller, Sacramento
BURTON W. OLIVER
Executive Director

REDACTED TEXT
Re: REDACTED TEXT
Dear REDACTED TEXT
This is in response to your letter of October 1, 1992. You own and operate a word processing and database business. You have copies of our Regulations 1502 and 1504 but need assistance in applying them to your specific transactions. I am enclosing a copy of Regulation 1502.1, so you will have all three regulations applicable to your transactions. I will now respond to each of your specific fact situations: 1.

You receive an audio tape which you transcribe and print out for your client.

This work is tax exempt as a service so long as you provide only one copy to your client. If additional copies are provided, they are subject to tax. This applies to multiple copies of form letters, where each is only slightly different, to personalize what is essentially the same letter. If the services and the copying occur as one transaction, the tax would apply to the gross receipts of the entire transaction with no deduction for the services performed before the copies are printed out. Annotation 430.0230, copy enclosed, and Regulation 1502.1(a). 2.

You receive hard copy notes which you transcribe and print out for your client.

This transaction would be the same as the transaction in number one, above. You perform a nontaxable service when you produce one original document. Making additional copies, without regard to how the original was prepared, and without regard to the type of equipment used to produce the copies, makes the transaction taxable. 3. You receive hard copy outline notes, from which you produce color overhead transparencies. You may or may not put each transparency into a cardboard frame. Where the true object of the transaction is the physical output produced, sales tax will apply. It is our opinion that the transparencies are the true object of the transaction, and subject to sales tax. client.

4.

You receive hard copy outline notes, which you transcribe and print out for your

-2-

December 21, 1992
420.0348

This transaction would be the same as the transaction in numbers one and two, above. 5. You receive a mailing list on a computer disk. “boilerplate” letters to each person on the list.

You produce individual

The true object of this transaction is the production of multiple copies of what is essentially the same letter. Regulation 1502.1(a). The transaction is subject to sales tax. If you have other questions, please contact me. Sincerely yours,

Donald L. Fillman
Tax Counsel
DLF:kl
Enclosures: Annotation 430.0230, Regulation 1502.1(a)
bc: San Francisco District Administrator