Were specially ordered brochures advertising an association's conventions and seminars exempt when a mailing house sent them free to recipients?

Plain-English summary

An association bought brochures specially printed to advertise conventions and seminars it conducted throughout California. The association never received the brochures. A mailing house distributed them to people who paid nothing and became their owners.

The Board concluded that the printer's sales were exempt printed sales messages. The brochures were specially ordered for the principal purpose of advertising, a mailing house handled distribution, and recipients received and owned them free.

The association also needed to give its printer an exemption certificate in the form prescribed by Regulation 1541.5(c). That certificate allowed the printer to report the brochure sales as nontaxable.

What this means for you

Associations, seminar promoters, printers, mailing houses, and tax professionals

Document all three substantive conditions and the certificate. Keep the special-order specifications, promotional event content, mailing-house distribution records, free-recipient terms, and the completed Regulation 1541.5(c) certificate.

Common questions

Q: Did advertising seminars count as promoting services?

A: Yes. The opinion treated the convention and seminar brochures as principally advertising qualifying services.

Q: Did the association take delivery?

A: No. The mailing house distributed the brochures directly to free recipients who became their owners.

Q: Was an exemption certificate required?

A: Yes. The association was instructed to issue the printer the certificate prescribed by Regulation 1541.5(c).

Citations and references

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

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 432.0076.800
• Original supporting opinion: 432.0076.800 PDF

Original ruling text

432.0076.800

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
(916) 445-8485

August 31, 1988

Mr. W--- M--Financial Secretary
C--- T--- L--- A--XXXX XXth Street, Xth Fl.
---, CA XXXXX
Re:

SR -- XX-XXXXXX

Dear Mr. M---:
This is in response to your July 11, 1988 letter requesting an opinion whether the sales of brochures to the C--- T--- L--- A--- (C---) are exempt from tax as printed sales messages pursuant to Revenue and Taxation Code section 6379.5 and Sales and Use Tax Regulation 1541.5. You also inquire as to the form of the exemption certificate should the sales of the brochures be exempt. It is our understanding of the facts that the C--- purchases from a printer brochures printed to the special order of the C---. These brochures advertise or promote conventions or seminars conducted throughout the State of California by the C---. It is also our understanding that C--- never receives these brochures from the printer but rather a mailing house (C--- C--- P---) distributes the brochures to persons who receive the free of charge and who become the owners thereof. Except where the sales are specifically exempted by statute, sales tax applies to the gross receipts of retailers from all retail sales of tangible personal property in this State (Rev. & Tax. Code § 6051). Section 6379.5 of the Revenue and Taxation Code provides an exemption from tax for the sales, storage, use, or other consumption in this State of catalogs, letters, circulars, brochures, and pamphlets consisting substantially of printed sales messages for goods and services. To qualify for the exemption, the printed sales messages must be:

Mr. W--- M---

-2-

August 31, 1988
432.0076.800

1. Printed to the special order of the purchaser for the principal 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 the agent of 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 that person who becomes the owner of the printed material. Provided our understanding of the facts is correct, it is our opinion that the sales of brochures to the C--- are exempt as printed sales messages pursuant to section 6379.5 and Regulation 1541.5. They are printed to the special order of the C--- for the principal purpose of advertising; they are distributed by a mailing house; and the receiver of the brochures receives them at no cost and they become the owner of the brochures. Assuming the sales of the brochures are exempt, you should issue your printer an exemption certificate in the form set out in Regulation 1541.5(c). Your issuance of the exemption certificate to the printer will enable your printer to report his sales to you of the brochures as nontaxable transactions. I have enclosed a copy of Regulation 1541.5 (Printed Sales Messages) which should answer any questions as to the format of the exemption certificate. If you have any further questions, please feel free to write again. Very truly yours,

E. L. Sorensen, Jr.
Senior Tax Counsel

ELS:md
Enclosure