Did proxy statements and SEC registration statements qualify as printed sales messages if mailed under the exemption's delivery rules?

Plain-English summary

A financial printer asked about prospectuses, offering circulars, proxy statements, registration statements, and similar documents. It submitted securities-offering prospectuses and an SEC registration statement required under the Securities Act of 1933.

The Board concluded that registration statements and proxy statements did not qualify as printed sales messages, regardless of how they were mailed. Neither type was printed principally to advertise or promote goods or services, so both failed Regulation 1541.5(a)(1).

The same opinion confirmed that prospectuses could qualify when the required mailing conditions were met. The distinction was the document's principal purpose, not simply its connection to a securities transaction.

The official opinion has a date conflict. Its formal first page is dated July 27, 1988, while the second-page footer says July 29, 1988. This page uses the formal letter date and preserves the conflicting footer in the original text.

What this means for you

Financial printers, securities issuers, compliance teams, and tax professionals

Do not group all securities documents together. Analyze whether the document promotes an offering or serves a filing, disclosure, or governance purpose; compliant mailing cannot cure a failure of the principal-purpose test.

Common questions

Q: Could mailing method make a proxy statement qualify?

A: No. The opinion denied exemption regardless of mailing method.

Q: Why did registration statements fail?

A: They were not printed principally to advertise or promote goods or services.

Q: Were prospectuses treated the same way?

A: No. The same opinion confirmed that prospectuses could qualify if the required mailing conditions were satisfied.

Q: What is the opinion's date?

A: July 27, 1988 on the formal first page and July 29, 1988 on the second-page footer.

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 432.0076
• Original supporting opinion: 432.0076 PDF

Original ruling text

432.0076

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-6493

July 27, 1988

Mr. J--- G--Vice President
B--- of --- ---, Inc.
XXX --- Street
--- ---, CA XXXXX
B--- of --- ---, Inc. – SR -- XX-XXXXXX
Printed sales messages – proxy statements and
SEC registration statements
Dear Mr. G---:
In your June 9, 1988 letter to Mr. Gary Jugum, Assistant Chief Counsel, you write: “At the advice of Carol Jaffe, Senior Tax Auditor in San Francisco, we are contacting you for legal determination on applying any sales tax to prospectuses, offering circulars, proxy statement, registration statements and similar printed documents. “I have enclosed previous correspondence and samples for your review, and would like to have a specific written response from your office on the legality and exact parameters of non sales tax for similar documents based on the recently approved ruling signed by the Governor in 1987 as it applies to financial printing.” You enclosed with your letter several printed prospectuses offering for sale either limited partnership interests or common stocks. You also enclosed a registration statement filed with the Securities and Exchange Commission, Washington, D.C., which is a filing required by the SEC under the Securities Act of 1933. You also enclosed a letter from Mr. J. E. (Jim) Speed, District Principal Auditor, San Francisco office, State Board of Equalization, to Mr. D--- L. R---, Treasurer/Controller of your company, dated January 25, 1988. Mr. Speed advised Mr. R--- that prospectuses will qualify as tax-exempt printed sales messages under Revenue and Taxation Code Section 6379.5 (which became effective

Mr. J--- V. G---

-2-

July 29, 1988
432.0076

January 1, 1987) and Sales and Use Tax Regulation 1541.5, assuming they are mailed in the manner required by that section and regulation. Opinion Mr. Speed has correctly advised your company in his letter that prospectuses constitute printed sales messages exempt from tax in the manner indicated in his letter. We do not feel there is anything we can add to his advice. Our opinion is that registration statements and proxy statements will not qualify as tax-exempt printed sales messages, regardless of the manner in which they are mailed. Neither registration statements nor proxy statements are “printed for the principal purpose of advertising or promoting goods or services.” These types of printed matter thus do not meet the definition of a printed sales message set out in Regulation 1541.5(a)(1). I enclose a copy of Regulation 1541.5 for your information. Please feel free to contact me if you have any further questions or comments about this letter. Sincerely,

John Abbott
Tax Counsel

JA:jb
Enclosure