Did contest blanks, comment forms, signs, envelopes, and bulk-rate indicia qualify for California's printed-sales-message exemption?

Plain-English summary

A printer submitted assorted advertising pieces for review under the printed-sales-message exemption. The Board concluded that several numbered pieces qualified when they were specially printed, delivered by the permitted seller, agent, or mailing-house route, and received free by third parties who became their owners.

Standalone contest-drawing entry blanks did not qualify. They could become components of a printed sales message if stapled, glued, or otherwise affixed so that they were integral to and sold with the qualifying message.

A customer-comment request was not printed principally to advertise or promote goods or services. A sign placed above customer-comment letters also was neither a printed sales message nor property delivered to third-party recipients under the regulation.

An envelope sold to enclose a qualifying printed sales message was exempt when sold with that message for shipment or delivery. If part of a print run went by Postal Service or common carrier to donees but another part went to the purchaser, only the qualifying delivered portion was exempt.

Printing a bulk-rate indicia did not automatically establish exemption. The underlying piece still had to qualify as a printed sales message and meet the delivery conditions; delivery to the purchaser remained taxable.

What this means for you

Printers, direct-mail businesses, marketers, and tax professionals

Review every component and every delivery segment separately. Preserve proof of physical attachment, qualifying promotional purpose, container use, third-party ownership at no cost, and the seller-arranged delivery route.

Common questions

Q: Were standalone contest entry blanks printed sales messages?

A: No. They qualified only if physically affixed as an integral component sold with a qualifying message.

Q: Did customer-comment materials qualify?

A: No. The request was not principally promotional, and the related sign also failed the delivery condition.

Q: Were mailing envelopes exempt?

A: Yes, when sold with qualifying printed sales messages as their shipment or delivery containers.

Q: Did a bulk-rate indicia make the sale exempt?

A: No. The content and delivery facts still had to satisfy the regulation.

Q: What if only part of the batch went directly to third-party recipients?

A: The opinion applied the exemption only to the qualifying portion and treated the portion delivered to the purchaser as taxable.

Citations and references

• California Revenue and Taxation Code § 6379.5
• California Sales and Use Tax Regulation 1541.5(a)(1), (b), (b)(3), (b)(7), and (b)(8)

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 432.0023.650
• Original supporting opinion: 432.0023.650 PDF

Original ruling text

STATE OF CALIFORNIA

432.0023.650

STATE BOARD OF EQUALIZATION
916-445-6450
May 24, 1989

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

Dear X----------------------,
This is in reply to your March 30, 1989 letter in which you asked whether sales of printed materials by X-------------------- are exempt from sales tax pursuant to 1986 Senate Bill 2527 which added section 6379.5 to the Revenue and Taxation Code. The State Board of Equalization has interpreted section 6379.5 and adopted Sales and Use Tax Regulation 1541.5, Printed Sales Messages, a copy of which is enclosed for your information. Generally, in order for the sale of printed materials to be exempt under Regulation 1541.5, the materials must first qualify as “printed sales messages”; that is, they must be catalogs, letters, circulars, brochures, and pamphlets printed for the principal purpose of advertising or promoting goods or services. (Reg. 1541.5, subd. (a)(1).) In such case, operative January 1, 1987, tax does not apply to the sale or use of the printed sales messages provided, they are: (1)

Printed to the special order of the purchaser;

(2)

Mailed or 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;

(3)

Received by any other person at not cost to that person who becomes the owner of the printed material. (Reg. 1541.5, subd. (b).)

You sent a number of items of advertising printed matter which you prepared for X--------------. We have numbered each of items in red for identification purposes. We believe that items numbered 2, 3, 4, 5, 8, 9, 10, 11, and 14, all qualify as “printed sales messages” that were printed to the special order of X------------. Your sale of such printed sales messages to X---------------- is exempt if you, your agent, or a mailing house, acting as the agent for X------------ mail or deliver the printed sales

messages through the United States Postal Service or by common carrier to third persons at no cost to those persons who become the owners of the printed sales messages. Items numbered 6 and 7, entry blanks for drawings, would not qualify as printed sales messages unless such items were stapled, glued, or otherwise affixed to the printed sales message in such a manner that it becomes a component or integral part of the printed sales message and is sold together with the printed sales message. (Reg. 1541.5, subd. (b)(8).) Item 12 is a request for comments and, in our opinion, is not printed for the principal purpose of advertising or promoting goods or services. Item 13 is a sign which apparently X------------- would not place in the store above “Customer Comment Letters” and would not either be a “printed sales message” nor be delivered to third party recipients pursuant to subdivision (b)(3) of Regulation 1541.5. Item 1 appears to be an envelope which you sell to X----------- and which will enclose a printed sales message. Tax does not apply to your sales of such envelops when sold with the printed sales messages for shipment or delivery. (Reg. 1541.5, subd. (b)(7).) If you deliver part of the printed sales messages through the postal service or by common carrier to the donees and deliver part of the printed sales messages to X------------ tax does not apply to your charge for the part delivered in accordance with the regulation, and tax does apply to the charge for the part delivered to X---------------. You asked whether the printing of a bulk rate indicia automatically qualifies the sale as exempt. No, as noted above, the printed matter must qualify as a “printed sales message.” Further, if you sell printed sales messages to a customer and deliver the printed sales messages to the customer, the sale would be taxable notwithstanding your printing of the bulk rate indicia. We hope this answers your questions; however, if you need further information, feel free to write again. Very truly yours,

Ronald L. Dick
Tax Counsel
RLD:sr
Encs.
Bc:

Oakland District Administrator