Was an independent contractor's labor taxable when producing newspaper paste-ups containing type and artwork?

Plain-English summary

A publisher distributed a weekly newspaper without charge and sometimes hired an independent contractor to paste up editorial and advertising copy.

California said a paste-up combining typed matter with illustrations or other artwork was tangible personal property whose production for a consumer constituted taxable fabrication under section 6006(b).

The contractor's charges were therefore taxable. The letter treated the completed paste-up as a manufacturing aid the publisher used to produce the newspaper.

Common questions

Did it matter that the contractor mainly charged for labor?

No. Section 6006(b), as applied in the letter, included fabrication of customer-furnished property within a taxable sale.

Did the letter decide the treatment of a type-only paste-up?

No. Its stated conclusion concerned paste-ups containing type and illustrations or other artwork.

Citations and references

• California Revenue and Taxation Code sections 6006(b), 6007, and 6051
• California Sales and Use Tax Regulation 1541(f)(3), (5)

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/430-0386.pdf

Original ruling text

430.0386

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

MEMBER
First District

1020 N STREET, SACRAMENTO, CALIFORNIA
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001
TELEPHONE (916) 920 - 7445

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

January 7, 1994

BURTON W. OLIVER
Executive Director

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

Dear X------------------------,
This is in reply to your letter we received November 23, 1993 regarding the application of sales tax to charges to X---------------- by persons performing production work for you. We understand that X---------------- publishes a weekly newspaper and distributes it without charge. You sometimes hire an independent contractor to paste up editorial and advertising copy. You asked whether the person's charges for that work is subject to sales tax. The sales tax is imposed on retailers at the applicable rate of the gross receipts for the privilege of selling tangible personal property at retail in this state. (Rev. & Tax. Code § 6051.) The law defines "sale" at Revenue and Taxation Code section 6006, subdivision (b), to include: "The producing, fabricating, processing, printing, or imprinting of tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, processing, printing, or imprinting." A "retail sale" or "sale at retail" means a sale for any purpose other than resale in the regular course of business in the form of tangible personal property (Rev. & Tax. Code § 6007.) Enclosed is a copy of Sales and Use Tax Regulation 1541, Printing and Related Arts. As noted at subdivisions (f) (3) and (f) (5), the transfer of typed matter combined with artwork in the form of a paste-up, mechanical, assembly, or camera-ready art is a sale subject to sales tax. When you hire an independent contractor to work on the production of a paste-up which consists of typed matter and illustrations or any other artwork, the person performs taxable fabrication labor under Revenue and Taxation Code section 6006, subdivision (b). The paste-up is a manufacturing aid you use to produce the newspaper. We hope this answers your questions; however, if you need further information, feel free to write again. Very truly yours,

Ronald L. Dick
Senior Tax Counsel
RLD:plh
Enclosure - Sales and Use Tax Reg. 1541