Were color overhead transparencies made from a client's outline notes taxable, and how did that differ from producing one transcription or multiple copies?

Plain-English summary

A word-processing and database business received customers' hard-copy outline notes and turned them into color overhead transparencies, sometimes placing each transparency in a cardboard frame. California found that customers wanted the physical transparencies, so the entire charge was taxable.

The opinion contrasted that result with transcription. Producing one original document from an audio tape or hard-copy notes was a nontaxable service. Supplying additional copies made the copying transaction taxable; when the service and copying were one transaction, tax applied to the full receipts without deducting the earlier transcription work.

Producing many minimally varied personalized boilerplate letters also was taxable because the true object was multiple copies of essentially the same letter.

What this means for you

Presentation-material businesses

Creative or transcription work did not avoid tax when the customer sought finished physical transparencies.

Word processors and transcriptionists

One original document received service treatment, while additional copies changed the result.

Accountants and tax professionals

Separate original transcription, finished presentation materials, copy count, personalization, and whether service and copying form one transaction.

Common questions

Q: Were the color transparencies taxable?

A: Yes. The physical output was the true object.

Q: Did adding cardboard frames change the stated result?

A: No distinction was drawn; the transparencies remained taxable.

Q: Was producing one transcription taxable?

A: No, when only one original was provided.

Q: Were additional copies taxable?

A: Yes, potentially including the full combined service-and-copying charge.

Q: Were personalized form letters nontaxable originals?

A: No. Slight variations did not change their character as multiple copies.

Citations and references

• California Sales and Use Tax Regulation 1502.1(a)
• Sales and Use Tax Annotation 430.0230, as cited in the opinion

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 515.0003
• Original supporting opinion: 515.0003 PDF

Original ruling text

515.0003

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

WILLIAM M. BENNETT
First District, Kentfield

1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-2641

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles

December 21, 1992

GRAY DAVIS
Controller, Sacramento
BURTON W. OLIVER
Executive Director

REDACTED TEXT
Re: REDACTED TEXT
Dear REDACTED TEXT
This is in response to your letter of October 1, 1992. You own and operate a word processing and database business. You have copies of our Regulations 1502 and 1504 but need assistance in applying them to your specific transactions. I am enclosing a copy of Regulation 1502.1, so you will have all three regulations applicable to your transactions. I will now respond to each of your specific fact situations: 1.

You receive an audio tape which you transcribe and print out for your client.

This work is tax exempt as a service so long as you provide only one copy to your client. If additional copies are provided, they are subject to tax. This applies to multiple copies of form letters, where each is only slightly different, to personalize what is essentially the same letter. If the services and the copying occur as one transaction, the tax would apply to the gross receipts of the entire transaction with no deduction for the services performed before the copies are printed out. Annotation 430.0230, copy enclosed, and Regulation 1502.1(a). 2.

You receive hard copy notes which you transcribe and print out for your client.

This transaction would be the same as the transaction in number one, above. You perform a nontaxable service when you produce one original document. Making additional copies, without regard to how the original was prepared, and without regard to the type of equipment used to produce the copies, makes the transaction taxable. 3. You receive hard copy outline notes, from which you produce color overhead transparencies. You may or may not put each transparency into a cardboard frame. Where the true object of the transaction is the physical output produced, sales tax will apply. It is our opinion that the transparencies are the true object of the transaction, and subject to sales tax. client.

4.

You receive hard copy outline notes, which you transcribe and print out for your

-2-

December 21, 1992
515.0003

This transaction would be the same as the transaction in numbers one and two, above. 5. You receive a mailing list on a computer disk. “boilerplate” letters to each person on the list.

You produce individual

The true object of this transaction is the production of multiple copies of what is essentially the same letter. Regulation 1502.1(a). The transaction is subject to sales tax. If you have other questions, please contact me. Sincerely yours,

Donald L. Fillman
Tax Counsel
DLF:kl
Enclosures: Annotation 430.0230, Regulation 1502.1(a)
bc: San Francisco District Administrator