Did California review of camera-ready art and paste-ups trigger tax before out-of-state book printing?

Plain-English summary

A California book publisher bought camera-ready copy, paste-ups, and assemblies containing artwork from California and out-of-state typographers. The finished items were ultimately used by printers outside California.

When a California typographer delivered the material to the publisher in California, sales tax applied even if the publisher immediately shipped it out of state. When an out-of-state typographer shipped material into California, no use tax was due if the publisher made no use of it and merely forwarded it to the out-of-state printer.

Temporary California possession for approval also did not defeat an otherwise qualifying interstate-commerce sale when the publisher returned the material for corrections and the typographer then shipped it to the out-of-state printer. The same approval-only handling did not create use tax on material from an out-of-state typographer.

Common questions

Did immediate shipment out of California erase tax on a California typographer's delivery?

No. Delivery by the California typographer to the California publisher remained taxable under the stated rule.

Was every California review treated as taxable use?

No. The memorandum allowed temporary possession for mere approval under the described return-and-out-of-state-shipment process.

Citations and references

• California Revenue and Taxation Code section 6009.1
• California Sales and Use Tax Regulations 1541(f) and 1620(a)(3)(A)
• Business Taxes Law Guide Annotations 325.0900 and 325.0920

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/430-0379.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

San Mateo – Audit (VW)

From:

Headquarters – Legal (RLD)

Subject:

X------------------------------

430.0379

Date:

March 11, 1982

This is in reply to your January 19, 1982 memorandum regarding the application of sales and use tax to sales of typography to X---------------------. We understand that X--------------------- is a publisher of books. The printers of the books are all located out of state. In state and out of state typographers furnish camera-ready copy, paste-ups or assemblies, all of which include artwork, to X---------------------. You asked for the application of tax to the typography when:

1. The finished product is sent to X--------------------- (in state) with X----------------forwarding it to the printers.
   Since the typography includes artwork, the transfer of such typography is subject to sales or use tax. (Sales and Use Tax Regulation 1541 (f).) When the typographer is located in California, sales tax applies to the typography that is sent to X--------------------in California regardless that X--------------------- immediately ships the typography out of state. (Regulation 1620 (a) (3) (A) .) When the typographer is located outside California and ships the typography to X-------------------- state, no use tax is due if X--------------------- makes no use of the typography but merely ships the typography to the printer to use out of state (Section 6009.1, Revenue and Taxation Code).
2. The finished product is sent to X--------------------- (in state) with X--------------------sending it back to the typographer for last-minute changes. The typographer after making
   changes, sends the finished product to the printers (out of state) and a copy to X-----------(in state). This gives X--------------------- one last chance to make any corrections before the printer begins.

If the sale of typography to X--------------------- by an in state typographer otherwise qualifies for exemption from sales tax as a sale in interstate commerce, the typographer would not lose the exemption by making a temporary transfer of possession of the typography to X-------------------- for mere approval before the typographer makes needed corrections and ships the typography out of state. (Sales and Use Tax Annotation 325.0900 and 325.0920.) This is true regardless that the typographer sends a copy of the typography to X---------------------. Further, no use tax is due if an out of state typographer sends typography to X-------------------- in California for such approval and X--------------------- returns the typography to the typographer to send to the out of state printer. We hope this answers your questions. If you need further information, feel free to write again.

RLD:jw