Was a California certificate seller the retailer of personalized calendars, cards, and postcards fulfilled and shipped by a Texas supplier?

Plain-English summary

A California business sold certificates redeemable for personalized trading cards, business cards, calendars, and postcards. A customer mailed the certificate, a photograph, custom text, and $5.95 postage and handling to a Texas supplier, which shipped the finished item to the customer in California.

The Board treated the California certificate seller as the retailer of the finished personalized products, even though the Texas company manufactured and shipped them.

The opinion assumed title passed from the Texas company to the California seller and then to the customer outside California when the supplier completed its delivery responsibilities. Because title passed outside the state, California sales tax did not apply, but the customer owed use tax on the purchase price for California use.

The California seller was responsible for collecting and remitting that use tax under section 6203. The written opinion superseded the Board's initial telephone advice from June 1996.

What this means for you

Certificate sellers, remote fulfillers, personalized-product businesses, and tax professionals

Identify the true retailer, title-passage point, fulfillment agency, customer destination, and full purchase price. Out-of-state title passage can shift the tax from sales tax to customer use tax without removing the California seller's collection duty.

Common questions

Q: Was the Texas supplier the only retailer?

A: No. The opinion treated the California certificate seller as retailer of the finished products.

Q: Why was use tax due instead of sales tax?

A: The opinion assumed title to the finished property passed outside California before California use.

Q: Who had to collect the use tax?

A: The California certificate seller.

Citations and references

• California Revenue and Taxation Code §§ 6012(a), 6051, 6201, 6203, and 6401
• California Commercial Code § 2401

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 480.0306
• Original supporting opinion: 480.0306 PDF

Original ruling text

480.0306

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

JOHAN KLEHS
First District, Hayward

LEGAL DIVISION (MIC:82)
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0082)
Telephone: (916) 324-2637
FAX: (916) 323-3387

DEAN ANDAL
Second District, Stockton
ERNEST J. DRONENBURG, JR.
Third District, San Diego
BRAD SHERMAN
Fourth District, Los Angeles

July 2, 1996
Ms. S--- L--- - M--XXXXX --- St.
--- ---, California XXXXX

KATHLEEN CONNELL
Controller, Sacramento

E. L. Sorensen, Jr.
Executive Director

Re: Sales of “Personal Pictures”
Dear Ms. L--- - M---:
This is in response to your letter dated June 6, 1996 regarding the application of tax on “personal picture” certificates which are redeemable for printed materials that contain a picture and text provided by your customers. You state: “I buy these certificates at a cost and then turn around and sell them to who[m]ever wants to buy them.... When the certificate is redeemed by the person who purchases ... [it], the customer, now owner of the certificate, takes it home, selects their picture, writes their own words, ... enclos[es] a check for $5.95 for postage and handling, [and] sends [these items] ... to Texas[.] In 2-4 weeks, [the customer receives] ... their product
[consisting of either] a set of trading cards, their business card with a picture on it, [a] calendar with a picture or a set of postcards.” You ask whether tax applies to your company’s operations. For purposes of this opinion, we assume that the Texas company manufactures the certificates and transfers title to these certificates to you outside the state. (We will not therefore discuss whether California tax applies to the Texas company’s sales or use of these certificates.) Discussion California imposes a sales tax on a retailer's gross receipts from the retail sale of tangible personal property inside this state unless the sale is specifically exempted from taxation by statute. (Rev. & Tax. Code § 6051). Taxable gross receipts include all amounts received with

Ms. S--- L--- - M---

-2-

July 2, 1996
480.0306

respect to the sale, with no deduction for the cost of materials, service, or other expense of the retailer passed on to the purchaser unless there is a specific statutory exclusion. (Rev. & Tax. Code § 6012(a)). When sales tax does not apply, use tax is imposed on the sales price of tangible personal property purchased from a retailer for the storage, use, or consumption of that property in California. (Rev. & Tax. Code §§ 6201, 6401). A retailer engaged in business inside this state is required to collect the applicable use tax from the purchaser at the time of sale of property to be used inside this state. (Rev. & Tax. Code § 6203.) We understand that you collect a predetermined amount from your customers for “personalized” picture items and provide them with a certificate which they mail (along with a picture and text) to your supplier in Texas. Your supplier then ships a finished “personal picture” to your customer inside this state on your behalf. Under these facts, we regard you as the retailer of the personalized calendars, trading cards and post cards purchased by your customers. We assume that title to these items passes from the Texas company to you (and then from you to your customer) outside this state when the Texas company completes its responsibilities with respect to physical delivery of the property. (See Cal. U. Com. Code § 2401.) Since title to this property passes outside this state, your customers owe use tax measured by the purchase price of the property since they purchased the property for storage or use inside California. (Rev. & Tax. Code §§ 6201, 6401.) You are responsible to collect this tax from your customers and remit it to this Board since you are the retailer of these goods. (Rev.
& Tax. Code § 6203.)
This letter supersedes and replaces our initial opinion regarding the application of tax on your operations as expressed to you during our telephone conversation in June, 1996. If you have any additional questions or information which may change our opinion, please write again. Sincerely,

Warren L. Astleford
Tax Counsel

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cc: --- District Administrator - (--)