Could an unlicensed delivery business using independent contractors to hang advertising on doors be a common carrier for the printed-sales-message exemption?
Apply this to your situation
This page answers the general question as of 1996. Ask about yours and see what current California tax law says, with citations.
Plain-English summary
An advertising agency proposed sending printed sales messages from the printer to an independent business. That business would place the advertising in plastic sleeves and hire independent contractors to hang it on residential doors. It did not hold a common-carrier license.
California said a person did not need a common-carrier license to qualify under Regulation 1541.5. The person needed to be in the business of transporting property for hire and offer those services indiscriminately to the public or some portion of the public.
Independent-contractor delivery to homes might satisfy the exemption's delivery requirement, but counsel lacked enough information about the business and its contractor arrangements to decide definitively. The opinion assumed all other exemption elements were met and addressed only delivery.
What this means for you
Advertisers, delivery businesses, and tax professionals
Document that the delivery provider transports property for hire and offers service broadly rather than through selected private contracts. A license is not the test, but the provider's actual business and contractor relationships still matter.
Common questions
Q: Was a common-carrier license required?
A: No.
Q: What operational characteristics were required?
A: Transporting property for hire and offering that service indiscriminately to the public or a portion of it.
Q: Did counsel conclusively approve the door-hanger arrangement?
A: No. It might qualify, but more facts were needed.
Citations and references
- California Revenue and Taxation Code § 6379.5
- California Sales and Use Tax Regulation 1541.5(a)(4)
Source
- Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
- Annotation page: Annotation 432.0080
- Original supporting opinion: 432.0080 PDF
Original ruling text
432.0080
STATE OF CALIFORNIA
JOHAN KLEHS
First District, Hayward
STATE BOARD OF EQUALIZATION
450 N STREET, SACRAMENTO, CALIFORNIA
(PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0082)
TELEPHONE (916) 324-2655
FAX (916) 323-3387
DEAN F. ANDAL
Second District, Stockton
ERNEST J. DRONENBURG, JR.
Third District, San Diego
BRAD SHERMAN
Fourth District, Los Angeles
October 21, 1996
KATHLEEN CONNELL
Controller, Sacramento
___
E. L. SORENSEN, JR.
Executive Director
Ms. P--- C. S--Certified Public Accountant
XXXXX --- ----- ---, CA XXXXX
Re:
M--- Design/P--- I--DMC E---, Inc.
(D--- M--- C---, Inc.)
SR – XX-XXXXXX
Dear Ms. S---:
This is in response to your letter dated August 7, 1996, in which you ask for clarification of the requirement that the printed sales messages be delivered by a common carrier in order for their sale to be exempt. In your letter you state: “. . . My client is basically an advertising agency that provides to their clients advertising that generally qualifies as an exempt printed sales message under Regulation 1541.5. “We have recently begun to offer a new means of distribution of a printed sales message and would like to be sure that this transaction will still qualify the sale as exempt under R. 1541.5. I have spoken with two audit supervisors and a senior tax auditor and also reviewed annotations 385.0070 as well as 432.0063. I believe our delivery method is acceptable under R. 1541.[5], but am requesting a ruling from your department. “The transaction is as follows: A piece of advertising is delivered from the printer to another independent business. This business puts the advertising in a plastic sheath and then has independent contractors hang these on the public’s door. This independent business does not have a common carrier license. Your audit personnel were not clear who might issue this type of license nor does R. 1541.5 specify that one is required. Reference has also been made as to a difference between a common carrier and a contract carrier.
Ms. Patricia C. Scurich
-2-
October 21, 1996
432.0080
“It is my reading of the definition of common carrier in R. 1541.5 that any person transporting property for hire and offering his services to the public qualifies as a common carrier. The definition does not specify that the transporting needs to be done by truck, UPS or FedEx for example. Even with those types of services, a human is still responsible for the ultimate delivery.” We understand the sale of the printed sales messages complies with all the requirements for the exemption contained in Revenue and Taxation Code section 6379.5 excepting delivery, and that your only question is whether delivery by the “independent business” (business) by independent contractors complies with the delivery method requirement for the sale of printed sales messages to be exempt. As you know, in order for the sale of a printed sales message to be exempt, the statute requires that the printed sales message be “mailed or delivered by the seller, the seller’s agent or a mailing house acting as agent for the purchaser, through the United States Postal Service or by common carrier. . . .” (Rev. & Tax. Code § 6379.5.) Your conclusion that a person need not be a licensed common carrier in order to be a common carrier as defined in Regulation 1541.5 is correct. In order to qualify as a common carrier for Regulation 1541.5 purposes a person must only be engaged in the business of transporting property for hire and offer his or her services indiscriminately to the public or to some portion of the public. (Sales and Use Tax Reg. 1541.5(a)(4).) The delivery of the printed materials by independent contractors hired by the business to peoples’ homes may satisfy the delivery requirement for the sale of printed sales messages to be exempt. We cannot make a definitive determination of whether the delivery requirement for the exemption is met without more information about the business and the transaction between the business and the independent contractors. As above noted, we understand you concluded that the printed materials meet all the other requirements for their sale to be exempt. This opinion applies only to, and whether, the delivery method you describe might satisfy the requirement that printed sales messages must be either mailed through the United States Postal Service or delivered by common carrier in order for their sale to be exempt. If you have any further questions in regard to the matters contained herein, please do not hesitate to write again. Yours very truly,
Anthony I. Picciano
Tax Counsel
AIP:cl
---
cc:
--- District Administrator
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