Were a vendor's sales of negatives and plates to printers retail sales or sales for resale?

Plain-English summary

A vendor sold negatives and plates to printers and asked when those transactions were taxable retail sales rather than sales for resale.

California focused on the sequence of title transfer and use. If the printer used the negative or plate before transferring title to its customer, the vendor's sale to the printer was taxable at retail. If the printer first transferred title to the customer and only then used the item in printing, the vendor's sale was for resale and not taxable.

When the vendor could not tell which sequence would occur, the letter recommended charging tax. A printer that actually resold the item before use could then claim the historical tax-paid-purchase-resold deduction on its own return.

Common questions

Did the printer's later transfer of the plate always establish resale treatment?

No. Title had to pass before the printer used the plate.

What did the letter recommend when the vendor was uncertain?

Collect tax first and let the printer claim the applicable deduction if it proved resale before use.

Citations and references

• Historical California Sales and Use Tax Rulings 14, 24, and 71

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/430-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/430-0340.pdf

Original ruling text

430.0340

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
October 30, 1950
Gentlemen:
This is in answer to your letter of September 6 in which you request clarification of the bulletin of the Sales Tax Administrator issued July 10, 1950, regarding Rulings 14 and 24. The application of the tax to your charges for negatives and plates sold to printers depends upon whether the printer uses the negatives and plates in his business prior to transferring title thereto to his customer or after he transfers title to his customer. If he uses them before transferring title, your sale to the printer is a taxable retail sale. If the printer transfers title to the negatives and plates to his customer and thereafter uses them in his printing operations, your sale to the printer is a sale for resale and not taxable. In view of the information furnished to you by X------------- of the X-------------, Los Angeles, it may be that it is a practice or custom in the trade that the printers do not transfer title to their customers to the property purchased from you, at least until after that property has been used by the printers. If this is the case, the advice given you by that the tax applies to your charges was correct. We have been furnished with a copy of a bulletin issued by the X------------which reads in part, "A lithographer who purchases lithographic plates is required to pay sales tax thereon. In one instance, however, if plates are resold before any use is made thereof, lithographer is permitted Tax Paid Purchase Resold Deduction, Ruling 71." The practice referred to of purchasing the merchandise tax paid and taking a tax paid purchase resold deduction pursuant to Ruling 71 is recommended by us in any case in which the vendor is doubtful as to whether the vendee will resell the property before using it or after using it. By this practice the vendor returns the tax to the State, reimburses himself from the customer (printer) which customer, if he believes he resells the materials before using it, may obtain a credit for the amount of tax reimbursement paid to his vendor by deducting the purchase price of such merchandise on his own sales tax return. We, accordingly, recommend this procedure to you, particularly in view of the statements made by the X-------------. Very truly yours,

E. H. Stetson
Tax Counsel
EHS:ph