Was a factory-tour charge taxable when each child received a stuffed bear or mouse and sometimes helped stuff the toy?

Plain-English summary

A stuffed-animal maker offered schoolchildren factory tours. Children paying the higher price watched a bear being made, helped stuff it, and kept it; younger children or others choosing the lower price received a small mouse. Neither toy was otherwise available for retail sale at the plant.

California concluded that each transaction was a taxable retail sale at the full amount charged. It did not matter that the item was sold only to tour participants, was made at the manufacturer's site, or involved the child's participation in making the toy.

Common questions

Was the charge treated as nontaxable admission to a tour?

No. The source treated the transaction as a retail sale of the stuffed animal.

Did customer participation in stuffing the bear change the result?

No.

Did limited availability at the factory matter?

No. The toys' unavailability through other retail sales did not prevent tax.

Citations and references

• Official source conclusion that the full historical tour prices were taxable retail-sale amounts

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/495-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/495-0466.pdf

Original ruling text

495.0466

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

WILLIAM M. BENNETT
First District, Kentfield

1020 N STREET, SACRAMENTO, CALIFORNIA
(PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)

CONWAY H. COLLIS
Second District, Los Angeles

(916) 445-3723

ERNEST J. DRONENBURG, JR
Third District, San Diego
PAUL CARPENTER
Fourth District, Los Angeles
GRAY DAVIS
Controller, Sacramento

July 1, 1991

Cindy Rambo
Executive Director

Ms. N--- V--Associate
--- & --XXX --- ----- ---, CA XXXXX

Re:

B--- B---B---, Inc.
S- -- XX-XXXXXX

Dear Ms. V---:

This is in response to your letter of June 25, 1991, which was received in this office on June 28, 1991. It has come to your attention that your client, B--- B--- B---, Inc., has been paying sales tax with respect to certain transactions occurring at its facility. We understand that school children tour the manufacturing facility. The tour price is
$8.00 per child or $2.00 per child. The children experience the process of “bear birthing” from start to finish. They see a bear cut out, sewn up, and eyes attached. The child then stuffs the small bear and is allowed to keep it. Children who receive the bear pay $8.00. For very small children or others who do not wish a bear, the price is $2.00, and they receive a small mouse. Neither the mouse nor the small bear is otherwise available on a retail basis. Your client has been paying tax on these transactions, and our San Francisco office informed you that the price of $8.00 or $2.00 is not subject to tax.

Ms. N--- V---

-2-

July 1, 1991
495.0466

Your client is correct. The transactions in question are retail sales transactions subject to sales tax at the $8.00 price or the $2.00 price, depending whether the child receives a bear or a mouse. It is immaterial that the items sold are sold at the site of the manufacturer, are sold only to persons taking the tour, or that the child participates in making the bear or mouse. The transactions in question are taxable, and your client should continue to pay tax, as it had previously. Very truly yours,

Gary J. Jugum
Assistant Chief Counsel
GJJ:sr