Did printed directories qualify for exemption when bills of lading named the purchaser as consignee at parking-lot delivery points before home and business distribution?

Plain-English summary

Sellers printed qualifying directories to a purchaser's special order and shipped them by common carrier to addresses selected by the purchaser, usually central parking lots in the delivery neighborhoods. The bills of lading named the purchaser as consignee. The purchaser then hired individuals it regarded as independent contractors to deliver the directories to homes and businesses.

California said the sellers' sales were taxable. Because the purchaser was the named consignee, the directories were delivered to the purchaser rather than to another person who received and owned them at no cost.

The purchaser's immediate handoff to independent delivery contractors did not create an exemption.

What this means for you

Directory publishers, carriers, and tax professionals

Bills of lading and consignee designations can decide who legally receives the property. A convenient drop point near final recipients does not help if the shipping documents identify the purchaser as consignee.

Common questions

Q: Did the directories qualify by content as printed sales messages?

A: Yes. The issue was delivery.

Q: Why did the parking-lot shipments fail?

A: The bills of lading named the purchaser as consignee.

Q: Did using independent contractors for final delivery change the result?

A: No.

Citations and references

• California Revenue and Taxation Code § 6379.5
• Regulation delivery-to-purchaser example cited in the source

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 432.0140
• Original supporting memorandum: 432.0140 PDF

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Mr. Ed Pedeupe
Audit Evaluation and Planning Unit

From:

Ronald L. Dick
Senior Tax Counsel

Subject:

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

432.0140

Date:

September 19, 1990

This is in reply to your August 6, 1990 memorandum regarding the application of sales and use tax to sales of directories by X------------------ and X------------------- to X------------------. You note that you are satisfied that the directoreis qualify as printed sales messages. The directories are printed to the speical order of X-----------------. The sellers ship the directories by common carrier to an address specified by X---------------. The carrier is X------------. The address specified by X------------- usually a parking lot centrally located within the area or neighborhood in which the directories are to be delivered. The bills of lading all show X---------- as the consignee. X--------------- hires individulas to deliver the directories to homes and businesses. X----------- believes that the individuals deliver the directories as independent contractors and not as employees of X----------------. Given this information, you asked our opinion as to whether or not the sales qualify for exemption under Sales and Use Tax Regulation 1541.5, Printed Sales Messages. As you know, Revenue and Taxation Code Section 6379.5 provides the exemption for the sale and use of printed sales messages: “There are exempted from the taxes uimposed this part the gross receipts from the sale of, and the 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 printed to the special order of the purchaser and mailed or delivered by the seller, the seller’s agent, or a mailing house, acting as the agent for the purchaser, through the United States Postal Service or by common carrier to any other person at no cost to that person who becomes the owner thereof.” We believe that, under the facts you described, the sales do not qualify for exemption. Since the bills of lading show X----------- as cosignee, the directories are sent to X-------------

rather than to “any other person at no cost to that person who becomes the owner thereof.” As noted at example 6 in subdivision (d) of Regulation 1541, the Board has takent he position that tax applies to sales of printed sales messages which are delivered to the purchaser. X-------------immediately turning the directories over to independent contracts to then deliver to donees does not provide a basis for exemption.

RLD:sr