Was a paste-up taxable when reproduction proofs were added to illustrations to create finished art?

Plain-English summary

Board legal staff reviewed an older annotation stating broadly that paste-ups of reproduction proofs were taxable. The memorandum said that wording could incorrectly cover type matter pasted up only to make a direct copy, which could be a service.

The underlying opinion instead concerned reproduction proofs added to illustrations to create finished art. California treated that finished-art paste-up as taxable tangible personal property.

Tax was measured by the full sale price of the finished art, including any portion the seller attributed to typography.

Common questions

Did the memorandum say every type-only paste-up was taxable?

No. Its purpose was to prevent the annotation from being read that broadly.

Could the seller exclude the typography amount from the finished-art price?

No. The recommended wording included that amount in the taxable sale price.

Citations and references

• Business Taxes Law Guide Annotation 430.0380

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/430-0380.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Mr. Donald J. Hennessy

From:

Philip R. Dougherty

Subject:

Annotation 430.0380 Paste-ups

430.0380

Date:

August 11, 1980

The BTLG annotation states: " 'Paste-ups' of reproduction proofs furnished to a customer are subject to tax. 11/26/63." This wording would seem to cover the situation in which only type matter was pasted up for the making of a direct copy of type matter: only, the sale of which would be a service. The annotated letter of EHS clearly refers to the use of type matter which is pasted up in a mechanical containing art work, i.e., the addition of type matter to a paste-up which was already taxable, with the result that the type matter became part of the tangible personal property sold. I suggest the wording of the annotation be changed. For instance, to: “ 'Paste-ups' in which reproduction proofs are added to illustrations to create finished art are subject to tax measured by the sale price of the finished art, including any part of the sale price the seller of the finished art may attribute to typography.”

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