Did advertising book covers shipped free to schools qualify for California's printed-sales-message exemption when more than half the applied cover was advertising?

Plain-English summary

A printer sold book covers containing local business advertising. Its client charged advertisers, schools received the covers free and gave them to students, the printer shipped directly to schools by UPS, and the printer said more than half of the applied cover displayed advertising.

California treated section 6379.5's definition narrowly. The exemption covered qualifying catalogs, letters, circulars, brochures, and pamphlets, but a book cover was none of those forms.

The book-cover sales therefore did not qualify for the printed-sales-message exemption, even though the printer asserted that the advertising percentage, no-cost recipient delivery, and common-carrier conditions were met.

What this means for you

Printers, school-program vendors, and tax professionals

Check the physical form first. Advertising percentage and qualifying delivery cannot cure an item that is outside the statute's enumerated printed categories.

Common questions

Q: Did more than 50 percent advertising make the book cover exempt?

A: No.

Q: Did free school distribution and UPS delivery establish exemption?

A: No. Those facts could not overcome the form requirement.

Q: Which forms did the statute list?

A: Catalogs, letters, circulars, brochures, and pamphlets.

Citations and references

• California Revenue and Taxation Code § 6379.5
• Business Taxes Law Guide Annotation 432.0064

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 432.0012.500
• Original supporting opinion: 432.0012.500 PDF

Original ruling text

432.0012.500

STATE OF CALIFORNIA

JOHAN KLEHS
First District, Hayward

STATE BOARD OF EQUALIZATION
450 N STREET, SACRAMENTO, CALIFORNIA
(PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0082)
TELEPHONE (916) 324-2655
FAX (916) 323-3387

DEAN F. ANDAL
Second District, Stockton
ERNEST J. DRONENBURG, JR.
Third District, San Diego
BRAD SHERMAN
Fourth District, Los Angeles
KATHLEEN CONNELL
Controller, Sacramento
___

July 8, 1996

E. L. SORENSEN, JR.
Executive Director

Mr. G--- C--C--- Printing Services
XXX North XX Street
---, CA XXXXX
Re:

C--- Printing Services
SR – XX-XXXXXX

Dear Mr. C---:
This is in response to your letter of March 29, 1996. You believe that your sales of book covers qualify for the printed sales messages exemption from sales tax for the following reasons:

“1.

The book covers contain advertising for businesses which are advertising their goods and/or services to the students in the vicinity of the schools. Our client charges these businesses a fee for advertising.

“2.

The school receives the book covers free of charge and in turn provides the book covers free of charge to students.

“3.

The piece is shipped by our firm directly to the schools via UPS.

“4.

As applied the book cover contains over 50% advertising. Please note areas which are part of the inside binding do not contain advertising due to the visual disadvantage.”

As you know, there is an exemption provided for the sale and use of certain printed sales messages printed to the special order of the purchaser. The printed sales messages must be delivered by the seller, the seller’s agent, or a mailing house, acting as the agent for the purchaser, through the United States Postal Service or by common carrier to any other person at no cost to that person who becomes the owner thereof. (Rev. & Tax. Code § 6379.5.) For purposes of this exemption, “printed sales messages” are defined as catalogs, letters, circulars, brochures and pamphlets which are printed for the principal purpose of advertising or promoting the sale of goods or services. (Id.)

Mr. G--- C---

-2-

July 8, 1996
432.0012.500

The definition of a printed sales message is a narrow one and includes only those types of items listed in the exemption. (See Bus. Taxes L. Guide Annot. 432.0064 (8/9/93).) The book cover in question is not one of the forms listed in the exemption (i.e., a catalog, letter, circular, brochure, or pamphlet) and thus cannot qualify as a printed sales message within the meaning of section 6379.5. Thus, sales of the book covers do not qualify for the printed sales messages exemption. If you have any further questions in regard to the matters contained herein, please do not hesitate to write again.

Yours very truly,

Anthony I. Picciano
Tax Counsel
AIP:cl
cc:

Sacramento District Administrator