Did sales messages distributed to consumers on disks, diskettes, or videotapes qualify for California's printed-sales-message exemption?

Plain-English summary

A media-services company asked about sales tax on sales messages delivered to consumers on disks, diskettes, and videotapes.

Section 6379.5 exempted qualifying catalogs, letters, circulars, brochures, and pamphlets. California treated that list narrowly because exemption statutes are strictly construed and the Board could not expand the listed materials beyond the statute's plain language.

Disks, diskettes, and videotapes were not among the listed printed forms. Tax therefore applied to the company's sales of the media and its duplication charges, even though the messages were intended for consumer distribution.

What this means for you

Media producers and tax professionals

Promotional content and free consumer distribution do not by themselves create a printed-sales-message exemption. Confirm that the physical item is one of the statutory printed forms before evaluating the other requirements.

Common questions

Q: Did a sales message become exempt because consumers received it free?

A: No.

Q: Were disks, diskettes, or videotapes listed printed forms?

A: No.

Q: Were duplication charges taxable?

A: Yes, along with the physical-media sales.

Citations and references

• California Revenue and Taxation Code § 6379.5
• California Sales and Use Tax Regulation 1541.5
• McConville v. State Board of Equalization, 85 Cal. App. 3d 156 (1978)
• Sales and Use Tax Annotation 432.0028

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 432.0033.600
• Original supporting opinion: 432.0033.600 PDF

Original ruling text

432.0033.600

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

JOHAN KLEHS
First District, Hayward

LEGAL DIVISION – MIC: 85
450 N STREET, SACRAMENTO, CALIFORNIA
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0082
TELEPHONE (916) 324-2653
FAX (916) 324-2618

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

E. L. SORENSEN, JR
Executive Director

August 1, 1996

Mr. J--- S---, Controller
S--- M--- Services, Inc.
XXXXX --- Avenue
---, California XXXXX-XXXX
Re:

Printed Sales Messages

Dear Mr. S---:
This is in reply to your letter of May 6, 1996 regarding the application of the sales tax to charges for printed sales messages delivered to consumers on disk, diskette and videotape. Sales and Use Tax Regulation 1541.5 concerns the application of tax to sales of “printed sales messages.” The regulation implements and interprets Revenue and Taxation Code section 6379.5 which provides an exemption for the sale of “catalogs, letters, circulars, brochures, and pamphlets” consisting substantially of printed sales messages for goods and services when delivered in accordance with the statute. As an exemption statute, section 6379.5 must be strictly construed. The Board cannot look beyond the plain language employed to expand or enlarge the description of exempt materials. (McConville v. State Board of Equalization, (1978) 85 Cal.App.3d 156.) In Sales and Use Tax Annotation 432.0028 (5/3/93), developmental software which a software company supplied free to consumers was found not to be within the exempt category, and tax applied to the vendor’s charge to the software company for the disks and the disk duplicating. Accordingly, we believe that tax would apply to the sale to your customers of the disks, diskettes, videotape, and the duplicating provided by you for your customer. We hope this answers your question; however, if you need further information or clarification, feel free to write again. Very truly yours,

John S. Butterfield
Tax Counsel
JSB/cmm