Did fabric sample books mailed free to users qualify as printed sales messages because they included labels and incidental printing?

Plain-English summary

A manufacturer received fabric from customers or their suppliers, cut it, and printed, labeled, and assembled it into sample books or swatches that a mailing house sent free to users.

California explained that a substantially printed catalog would not lose exemption merely because it included an incidental sample. The reverse was also true: a sample book did not qualify merely because it contained incidental printing.

Here, the fabric was the primary marketing tool and the printing was ancillary. The books consisted substantially of samples, not printed sales messages, so their sales did not qualify for the exemption.

What this means for you

Sample-book manufacturers and tax professionals

Identify what carries the marketing value. If physical samples dominate and printing only labels or explains them, qualifying delivery cannot turn the item into a substantially printed sales message.

Common questions

Q: Did free mailing to users make the books exempt?

A: No. The books first had to qualify by content and form.

Q: Was incidental printing enough?

A: No.

Q: Could a printed catalog contain an incidental sample?

A: Yes, without automatically losing printed-sales-message status.

Citations and references

• California Revenue and Taxation Code § 6379.5
• California Sales and Use Tax Regulation 1541.5(a)(1)

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 432.0042.750
• Original supporting opinion: 432.0042.750 PDF

Original ruling text

432.0042.750

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

JOHAN KLEHS
First District, Hayward

LEGAL DIVISION – MIC: 82
450 N STREET, SACRAMENTO, CALIFORNIA
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0082
TELEPHONE (916) 327-2291
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

May 4, 1995
BURTON W. OLIVER
Executive Director

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

Dear X------------------,

Your letter dated March 22, 1995 to Honorable Brad Sherman, Board Member, Fourth District, regarding the application of the Sales and Use Tax Law to your sales of sample books has been referred to the Legal Division for response. You explain that you manufacture sample books and cards. Your customers furnish fabric to you, either directly or through their suppliers. You cut the fabric, and then print, label, and assemble it into sample books or swatches. You state that the sample books are then "shipped to the user, in this particular case by a mailing house, at no cost to the receiver." You indicate your opinion that these transactions satisfy the conditions of the printed sales message exemption set forth in subdivisions (b) (1) through (b) (3) of Regulation 1541.5. Thus, as I understand your question, you ask whether we regard the sample books as printed sales messages within the meaning of the exemption provided by Revenue and Taxation Code section 6379.5 and explained in Regulation 1541.5. If sample books qualify as printed sales messages and their sale satisfies the conditions set forth in subdivisions (b) (1) through (b) (3) of Regulation 1541.5, no sales or use tax applies to the transaction. If the sample books do not qualify as printed sales messages, your sales do not qualify for the printed sales message exemption. The exemption is limited to the sale or use of catalogs, letters, circulars, brochures, and pamphlets consisting substantially of printed sales messages for goods and services. (Rev. & Tax. Code § 6379.5; see Reg. 1541.5(a) (1).) A catalog consisting substantially of printed sales messages would not be disqualified from as a printed sales message merely because it contained an incidental sample. On the other hand, a sample book does not qualify as a printed sales message merely because it contains some incidental printing. Thus, we do not regard sample books of the type you manufacture as constituting printed sales messages. Any printing on the sample books is ancillary to the fabric, which is the primary marketing tool. That is, the sample books do not appear to consist substantially of printed sales messages for goods and services, but rather to consist substantially of samples. Your sales therefore do not qualify for the printed sales message.

If you have further questions, feel free to write again.
Sincerely,

David H. Levine
Supervising Staff Counsel
DHL:cl
Cc:

Honorable Brad Sherman

BOE-1137 REV. 11 (7-02)