Did paid bold and Spanish-language listings count as advertising when measuring whether a telephone directory was principally promotional?

Plain-English summary

A printer asked about a telephone directory containing yellow pages, coupons, Spanish listings printed in red, and bold listings in the white pages. The customer hired a distributor to pick up the directories from the printer's plant.

California required more than half of a directory to advertise or promote goods or services before treating it as a printed sales message. The submitted directory had about 302 pages: 138 directory-listing pages and 164 advertising pages.

Paid bold listings and red Spanish listings did not count as advertising because they appeared with, and remained, ordinary listings. Even excluding them, the yellow pages and coupon section made up more than 50 percent of the directory, so the directory qualified as a printed sales message.

Content qualification did not finish the exemption analysis. The printer's sale was exempt only if the purchaser never obtained possession and its distributor delivered the directories free to other persons who became their owners.

What this means for you

Directory printers, publishers, distributors, and tax professionals

Classify content by function rather than whether the listing carries an added charge or visual emphasis. Then separately document that the purchaser never takes possession and that recipients receive the directories free.

Common questions

Q: Did paid bold white-page listings count as advertising?

A: No. The opinion treated them as listings, not advertisements.

Q: Did red Spanish-language listings count as advertising?

A: No. They also appeared with other listings and remained directory content.

Q: Why did the directory still qualify?

A: Yellow-page advertisements and the coupon section exceeded half of the directory's printed area.

Q: Was the printer's sale automatically exempt once the content qualified?

A: No. The purchaser also had to avoid possession, and its distributor had to deliver the directories free to other owners.

Citations and references

• California Revenue and Taxation Code §§ 6051 and 6379.5
• California Sales and Use Tax Regulation 1541.5(a)(1)

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 432.1700
• Original supporting opinion: 432.1700 PDF

Original ruling text

432.1700

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

MEMBER
First District, Kentfield

450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-3828

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR
Third District, San Diego

November 5, 1993

MATTHEW K. FONG
Fourth District, Los Angeles
GRAY DAVIS
Controller, Sacramento

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

Re:

BURTON W. OLIVER
Executive Director

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

Dear X-------------------,
This is in response to your letter of September 16, 1993 regarding the taxable status of a telephone directory printed by X-----------------. Your letter states that the Yellow Page section, the coupon section, the Spanish listings in red, and the bold listings in the white section are paid advertisements. A distributor hired by your customer picks up the directories from your plant. We assume that your inquiry is whether sales tax applies to X-----------------’s charges for the sale of the telephone directory. Revenue and Taxation Code section 6051 imposes a sales tax on all retailers measured by their gross receipts from retail sales of tangible personal property. Unless a specific exemption applies, sales of the telephone directory by X----------------- are taxable. Revenue and Taxation Code section 6379.5 provides an exemption for sales of printed sales messages 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 an agent for the purchaser, through the United States Postal Service or by other common carrier to any other person at no cost to that person who becomes the owner of the printed material. The relevant terms of the exemption are explained in Regulation 1541.5 (copy enclosed). Subdivision (a) (1) of. Regulation 1541.5 defines "printed sales messages." The term does not include directories unless they meet the principal purpose of advertising or promoting goods or services. The Board has taken the position that a directory qualifies as a "printed sales message" if more than one-half of the directory consists of such advertising. Enclosed with your letter was a copy of the telephone directory at issue. This directory contains approximately 302 pages, 138 of which are directory listings and 164 of which are advertisements. Since more than 50% of the printed area is advertising of promoting goods or services, the directory does qualify as a printed sales message. You mention in your letter that you believe that the bold listings in the white pages as well as the Spanish listings in red are paid advertisements. Because these appear along with the other listings and are also just listing, we do not regard these pages with the bold listings as advertisements. Nevertheless, the telephone directory qualifies as a printed sales message because the advertisements in the yellow pages and the coupon section in the back makeup more than 50 percent of the directory.

If the purchaser does not obtain possession of the directories and they are delivered by the purchaser’s distributor mentioned in your letter to another person at no cost to that person, then X---------------- sales of the directory are exempt from sales tax. If you have any further questions, please do not hesitate to write again. Sincerely,

Ms. Sukhwinder K. Dhanda
Staff Counsel
SKD:plh
Enclosure – Reg. 1541.5