Were specially printed automotive letters, brochures, posters, envelopes, and mailing tubes exempt when the printer mailed them free to dealers?

Plain-English summary

A printer produced automotive promotional materials to a car company's specifications. The package included three letters, a brochure describing a new engine program, posters advertising cars and accessories, envelopes, and mailing tubes. The printer mailed the completed packages to the company's dealers.

The letters introduced the engine program, supplied a sample customer letter explaining its components, and introduced promotional posters to dealer parts managers. The brochure combined pictures and words announcing and describing the program. The posters promoted a Christmas car purchase and shopping for automotive needs.

The Board concluded that the letters, brochure, and posters were printed sales messages. Each principally advertised or promoted goods or services, was mailed or delivered by the printer as seller, and was received at no cost.

The envelopes and mailing tubes were also exempt because they were sold with the qualifying printed sales messages as containers for shipment or delivery under Regulation 1541.5(b)(7).

What this means for you

Printers, automotive marketers, dealer networks, and tax professionals

Preserve the customer's specifications, the promotional content, proof that the seller handled mailing or delivery, evidence that recipients paid nothing, and records showing that envelopes or tubes were sold with the messages they contained.

Common questions

Q: Did letters sent first to dealers qualify?

A: Yes on the stated facts. The Board found the submitted letters promotional and received free under the seller's mailing arrangement.

Q: Did the posters qualify even though posters were not listed by name in the statutory quotation?

A: Yes. The opinion expressly treated these automotive posters as printed sales messages.

Q: Why were the envelopes and mailing tubes exempt?

A: They were sold with qualifying printed sales messages for shipment or delivery.

Citations and references

• California Revenue and Taxation Code §§ 6051 and 6379.5
• California Sales and Use Tax Regulation 1541.5(b)(7)

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 432.0073.001
• Original supporting opinion: 432.0073.001 PDF

Original ruling text

432.0073.001

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
(916) 445-8485

March 1, 1989

Mr. L--- W---, Comptroller
K--- G--- I---, Inc.
XXXX --- -----, California XXXXX
SR -- XX XXXXXX
Dear Mr. W---:
This is in response to your December 19, 1988, letter to the Board’s legal unit. You have requested an opinion concerning whether K--- G--- I---, Inc.’s (K---) sales of printed materials to
[---] [---] of [---], Inc. (Z) are exempt from sales tax as sales of printed sales messages pursuant to Revenue and Taxation Code section 6379.5 and Sales and Use Tax Regulation 1541.5. It is our understanding of the facts that the printed materials which K--- sells to [Z] are printed to the specifications of [Z]. These printed materials consist of letters, a brochure, and posters. Of the three letters you enclosed, one is addressed to [Z] dealers introducing [Z]’s new engine programs; one is a sample letter sent to [Z] dealers which they can copy and send to their prospective customers. This letter details the format of the new engine program by listing all the included components which comprise the replacement engines; and, the third letter introduces to [Z] dealer parts managers posters that can be displayed which advertise [Z] automotive products. The brochure combines pictures and printed words announcing and detailing [Z]’s new engine program. The posters consist of pictures of [Z] automobiles and accessories. One suggests the purchase of a car for Christmas while the other indicates that consumers can fulfill all their needs by shopping at
[Z].
K--- also sells to [Z] envelopes and mailing tubes in which the letters, a brochure, and posters are enclosed for mailing. Further, K--- mails the envelopes and mailing tubes which enclose the letters, brochures, and posters to all the [Z] dealers.

Mr. L--- W---

-2-

March 1, 1989
432.0073.001

Except where the sales are specifically exempted by statute, sales tax applies to the gross receipts of retailers for all retail sales of tangible personal property in this state (Rev. & Tax. Code § 6051). Section 6379.5 and Regulation 1541.5 provide an exemption from tax for the sale, storage, use or other consumption in this state of catalogs, letters, circulars, brochures, and pamphlets consisting substantially printed sales messages for goods and services. To qualify for the exemption, the printed sales messages must be:

1. Printed to the special order of the purchaser for the principle purpose of
   advertising or promoting goods or services.
   2.

Mailed or delivered by the seller of the printed material, the seller’s agent or a mailing house acting as an agent for the purchaser, through the United States Postal Service or by common carrier.

3.

Received by any person other than the purchaser or purchaser’s agent at no cost to the person who becomes the owner of the printed material.

Pursuant to the foregoing criteria, it is our opinion that the letters, brochures, and posters are printed sales messages within the meaning of Revenue and Taxation Code § 6379.5 and Sales and Use Tax Regulation 1541.5. The principal purpose for each is to advertise or promote a good or service; they are mailed or delivered by K---, the seller of the printed material; and, they are received by persons at no cost. Additionally, it is our opinion that K---’s sales of envelopes and mailing tubes are also exempt from tax since each are sold with the printed sales messages for shipment or delivery. (Sales and Use Tax Regulation 1541.5(b)(7).) I have enclosed Sales and Use Tax Regulation 1541.5 (Printed Sales Messages) for your information. If you should have any further questions concerning this matter, please feel free to write again. Very truly yours,

E. L. Sorensen
Senior Tax Counsel

ELS:cl
Enclosures
cc:

--- District Administrator