Which catalog batches were exempt when a non-California printer sent some directly to a mailing house, some to the client, and some to the client's warehouse for later mailing?

Plain-English summary

A California wholesale and retail distributor ordered product-and-price catalogs from a non-California printer in quantities covering several mailings. Customers around the country received the catalogs free through a California mailing house.

The printer handled the catalogs three ways. It sent most of the next mailing directly to the mailing house, sent some directly to the client for client distribution, and sent the remaining future-mailing inventory to the client's warehouse until the mailing house later collected it.

Assuming the catalogs substantially contained printed sales messages and free customers became their owners, only the first arrangement qualified. Direct printer-to-mailing-house delivery avoided purchaser receipt.

The second arrangement was taxable because the printer delivered the catalogs to the client. The third was also taxable because delivery to the client's warehouse was still delivery to the purchaser, even though the catalogs remained on pallets and a mailing house later picked them up.

What this means for you

Catalog sellers, printers, warehouses, mailing houses, and tax professionals

Keep future-mailing inventory outside the purchaser's possession if claiming this exemption. Direct printer-to-mailing-house delivery matters; later transfer from the purchaser's warehouse does not undo earlier purchaser receipt.

Common questions

Q: Which catalogs qualified?

A: The batch delivered directly from the printer to the mailing house for the next customer mailing.

Q: Did catalogs sent to the client qualify if the client later mailed them free?

A: No. Delivery to the purchaser defeated the exemption.

Q: Did warehouse storage for a future regular mailing qualify?

A: No. The client's warehouse receipt occurred before the mailing house collected the catalogs.

Citations and references

• California Revenue and Taxation Code § 6379.5
• California Sales and Use Tax Regulation 1541.5

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 432.0022
• Original supporting opinion: 432.0022 PDF

Original ruling text

432.0022

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

MEMBER
First District

450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-2641

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego

August 19, 1993

MATTHEW K. FONG
Fourth District, Los Angeles
GRAY DAVIS
Controller, Sacramento

BURTON W. OLIVER
Executive Director

Mr. D--- - F--C--- & L----- --- --XXX --- -----, CA XXXXX Dear Mr. F---: This is in response to your letter of April 28, 1993, which requested our opinion as to the application of sales or use tax to sales of printed sales messages purchased to your client. Your client is a wholesale and retail distributor of tangible personal property with offices in California. Catalogs which describe products and prices are regularly sent to its customers throughout the country, without charge. The catalogs are printed to the special order of your client by a non-California printer, usually enough for several mailings. A mailing house in California usually ships them by common carrier or postal service. There are three ways in which the catalogs are handled: 1.

The printer delivers most of the catalogs (which are to be distributed in the next mailing) to the mailing house for shipping to clients' customers.

2.

The printer delivers some of the catalogs to your client for distribution directly to its customers.

3.

The balance of the catalogs, which will be held until a future "regular interval" mailing time comes, are shipped to your client's warehouse where they remain on pallets until the mailing house sends a truck to pick them up for the next mailing.

Mr. D--- - F---

-2-

August 19, 1993
432.0022

You requested that we verify your conclusion that the catalogs in examples 1 and 3 are exempt from tax under Revenue and Taxation Code section 6379.5 and Regulation 1541.5, and that the catalogs in example 2 are subject to tax. It is our opinion that your conclusions are correct as to examples 1 and 2, but not 3, if our stated assumptions are correct. We assume that the catalogs consist substantially of printed sales messages which become owned without cost by the customers to whom they are distributed. With regard to example 3, the Board has held that Revenue and Taxation Code section 6379.5 and Regulation 1541.5 require that to be eligible for the exemption as "printed sales messages," the delivery of the property must be to "any other person," without first being delivered to the purchaser. In your case, the receipt by your client of the property precludes your client from use of the printed sales messages exemption. If you have further questions, please contact me. Sincerely yours,

Donald L. Fillman
Tax Counsel
DLF:wk