Did custom tide-table calendars qualify as printed sales messages, and were direct out-of-state mailings to end customers taxable?

Plain-English summary

An advertising-specialty distributor sold 2,000 calendars with custom tide-table overprinting. A Missouri factory mailed each calendar directly to the purchaser's end customers.

California said calendars did not qualify as printed sales messages. Regulation 1541.5(a)(1)'s phrase allowing items that principally advertised or promoted goods or services modified only "directories," not the preceding excluded items such as calendars. The opinion also characterized calendars, especially those containing tide tables, as principally reference materials.

The transaction still was not taxable on the stated facts. The distributor's sale occurred outside California, so California sales tax did not apply. Because the purchaser directed the factory to place the calendars in the mail outside California, title passed to the end customers then; the purchaser's use occurred solely outside California, so there was no California use tax to collect.

What this means for you

Promotional-product sellers, calendar buyers, and tax professionals

An item can fail the printed-message exemption yet be nontaxable for a separate reason. Analyze product classification first, then the location of sale, title passage, purchaser use, and direct-mail instructions.

Common questions

Q: Did advertising content turn a calendar into a printed sales message?

A: No. The opinion read the promotional-purpose exception as applying only to directories.

Q: Did the tide tables matter?

A: They reinforced the conclusion that the calendars served a reference purpose.

Q: Why was no California tax due anyway?

A: The out-of-state factory mailed directly to end customers, causing the sale and purchaser's use to occur outside California under the opinion's title-passage analysis.

Citations and references

• California Revenue and Taxation Code §§ 6201, 6202, 6203, and 6204
• California Sales and Use Tax Regulation 1541.5(a)(1)
• Sales and Use Tax Annotation 280.0360 (cited in the source)
• August 10, 1987 Notice to Interested Parties concerning proposed Regulation 1541.5 amendments (described in the source)

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 432.0018
• Original supporting opinion: 432.0018 PDF

Original ruling text

432.0018

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-6450

March 29, 1990
REDACTED TEXT

RE:

REDACTED TEXT

Dear REDACTED TEXT:
This is in reply to your February 13, 1990 letter regarding the application of sales and use tax to your sales of calendars. You note the following facts: “We are distributors of Advertising Specialties. We have a customer (REDACTED TEXT) in Newport Beach who each year orders 2000 calendars with special tide tables overprint on the calendar pad. “We order the catalogs through a factory in Missouri and these calendars are shipped singly by the factory to the end-user (customers of REDACTED TEXT).” You note that REDACTED TEXT suggests that your sales of the calendars are exempt from tax pursuant to Sales and Use Tax Regulation 1541.5, Printed Sales Messages. Specifically, you sent a copy of the regulation and highlighted the following words of subdivision (a)(1) of the regulation which defines the term “printed sales messages”: “‘Printed Sales Messages’….The term does not include…calendars… unless they meet the principal purpose of advertising or promoting goods or services.” We disagree that calendars qualify as printed sales messages. On August 10, 1987, the State Board of Equalization published a Notice to Interested Parties concerning amendments to proposed Regulation 1541.5. That notice provided that, “subdivision (a)(1) is amended to…provide that excluded from the definition of printed sales messages are directories unless they meet the principal purpose of advertising or promoting goods or services.” Therefore, we believe that the phrase “unless they meet the principal purpose of advertising or promoting goods or services” modifies the word “directories” and not the word “calendars”. Calendars are printed for the principal purpose of reference, and we believe that is especially true where, as in the fact you

REDACTED TEXT

-2-

March 29, 1990
432.0018

note, the calendars also contain tide tables. Therefore, we do not believe that your sales of calendars would be exempt from tax as sales of “printed sales messages”. However, we believe that there is another basis upon which your sales of the calendars to REDACTED TEXT are nontaxable. Since the calendars are shipped from the out-of-state factory directly to the customers of REDACTED TEXT, your sale occurs outside California, and sales tax does not apply. If you made an out-of-state sale to REDACTED TEXT of tangible personal property which REDACTED TEXT would use in California, REDACTED TEXT’s use of the property in California would be subject to the use tax. (Rev. & Tax. Code §§ 6201, 6202.) Since you are a retailer engaged in business in this state, you would be responsible for collecting the use tax from REDACTED TEXT and paying the tax to this state. (Rev. & Tax Code §§ 6203, 6204.) However, since REDACTED TEXT directs that the calendars be placed in the mail out of state, title to the calendars passes to REDACTED TEXT’s customers at that time. REDACTED TEXT’s use of the property is solely outside California and REDACTED TEXT is not liable for use tax. (Bus. Taxes Law Guide Annot. 280.0360.) Accordingly, you are not liable for payment of sales tax nor collection of use tax on the sale of calendars under the facts provided in your letter. We hope this answers your question; however, if you need a further information, feel free to write again. Very truly yours,

Ronald L. Dick
Tax Counsel
RLD:sr
bc:

San Bernardino District Administrator