Did prospectuses offering limited-partnership interests or common stock qualify as printed sales messages?

Plain-English summary

A financial printer submitted prospectuses offering limited-partnership interests or common stock, along with a Securities and Exchange Commission registration statement and questions about similar financial documents.

The Board confirmed prior advice that prospectuses were printed sales messages under section 6379.5 and Regulation 1541.5. Their tax exemption remained conditional on mailing them in the manner required by the statute and regulation.

The same opinion drew a clear boundary: proxy statements and SEC registration statements did not qualify regardless of how they were mailed because their principal purpose was not advertising or promoting goods or services.

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, mailing houses, and tax professionals

Classify each securities document by purpose. An offering prospectus may qualify if every delivery condition is satisfied, but filing and governance documents do not become promotional merely because they accompany the same transaction.

Common questions

Q: Did the submitted prospectuses qualify?

A: Yes, assuming they were mailed under the required statutory and regulatory conditions.

Q: Did all securities documents qualify?

A: No. The opinion denied printed-message treatment to proxy and registration statements.

Q: Why were proxy and registration statements different?

A: Their principal purpose was not advertising or promoting goods or services.

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 432.0610
• Original supporting opinion: 432.0610 PDF

Original ruling text

432.0610

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
432.0610

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