Were charges taxable when a public facsimile network transmitted a customer's chart, photograph, contract, or other document over telephone lines to a distant station?
Apply this to your situation
This page answers the general question as of 1970. Ask about yours and see what current California tax law says, with citations.
Plain-English summary
A national network operated public stations that transmitted a customer's chart, photograph, contract, or other document over telephone lines. A distant station reproduced the exact copy, notified the recipient, and made it available for pickup or messenger delivery. The customer paid a transmission fee plus telephone charges.
California treated the arrangement as a nontaxable service, although the opinion said the question was close. The customer's true object was rapid communication or mailing, not purchasing the remote paper copy.
The network was the consumer of the photocopy paper used in providing the service. Tax applied when the network acquired that property, not to its receipts from customers.
The source also notes that the telecopier equipment was leased and tax was paid based on the monthly lease charge.
What this means for you
Communication and document-transmission providers
A remotely reproduced document could remain incidental when speed and transmission were the central service.
Accountants and tax professionals
Review transmission, telephone, paper, pickup, messenger, equipment rental, customer access, copy quantity, and whether the customer primarily buys communication or reproduced property.
Common questions
Q: Were the facsimile transmission receipts taxable?
A: No.
Q: Who was the consumer of the receiving-station paper?
A: The network provider.
Q: What did the customer primarily buy?
A: Rapid communication or mailing service.
Citations and references
- California Sales and Use Tax Regulation 1501
Source
- Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
- Annotation page: Annotation 515.0011.200
- Original supporting opinion: 515.0011.200 PDF
Original ruling text
515.0011.200
STATE OF CALIFORNIA
STATE BOARD OF EQUALIZATION
October 27, 1970
REDACTED TEXT
Dear Mr. REDACTED TEXT:
Your letter of May 19, 1970, addressed to REDACTED TEXT of our Pasadena office has been referred to this office for reply. You request our opinion as to the application of the Sales and Use Tax Law to the activities of your client, REDACTED TEXT. We understand that REDACTED TEXT is part of a national network which sends printed information over telephone lines through signals generated by a telecopier machine to reproduce an exact copy at a distant location. This operation is accomplished by establishing public locations which perform the sending and receiving operations. REDACTED TEXT’s customer brings his chart, photo, contract or any other material to the nearest REDACTED TEXT public station. If he is a registered subscriber, he can show his ID card to have the charges billed to him. As a registered subscriber he will also receive a discount from list REDACTED TEXT rates. The charge made to the customer consists of a transmission fee plus the normal telephone charges involved in the transmission. The REDACTED TEXT station operator places the material into the facsimile transmission unit. The operator then places a call to the REDACTED TEXT station nearest the desired destination and inserts her telephone into the acoustic coupler. The customer’s material is then automatically transmitted. The receiving REDACTED TEXT station operator removes the facsimile copy from the facsimile receiving unit and acknowledges that the message has been received. The receiving REDACTED TEXT station then calls the local recipient to advise him that a message has been received. The recipient can pick up the message or have it delivered to him by special messenger. The equipment used for this service is leased from the manufacturer, and tax is paid, measured by the monthly lease charge.
In our opinion tax does not apply to REDACTED TEXT’s receipts from the operation of its photocopy transmission service. Although the question is a close one, we think the service element outweighs the sales element in these transactions, such that the “true object” of the transactions can be said to be the performance of a service and not the furnishing of the property produced by the service [see our regulation 1501, Service Enterprises Generally, copy enclosed].
515.0011.200
-2-
October 27, 1970
What the customer desires, in coming to REDACTED TEXT, is a rapid mailing or communication service. REDACTED TEXT is the consumer and not the retailer of tangible personal property, such as photocopy paper, used by it in rendering its photocopy transmitting service. Tax applies to the sale of such property to REDACTED TEXT and not to REDACTED TEXT’s receipts from the performance of its service. Very truly yours,
Gary J. Jugum
Tax Counsel
GJJ:ab
Enclosure
bc:
REDACTED TEXT – District Principal Auditor REDACTED TEXT
REDACTED TEXT – Administrator
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