Which seminar-development charges were taxable when the provider delivered guides, binders, evaluation forms, artwork, and printed flyers?

Plain-English summary

California treated writing and developing a seminar as a service. Masters for printing, participant guides, and presentation materials delivered as part of that work were incidental to the service, so the provider's charges for those activities were not taxable. The provider was the consumer of materials used to perform the work.

The result changed for production work. Charges to reproduce 350 binder and participant-material sets were taxable. Charges for final camera-ready flyer art used for reproduction or display were also taxable.

Writing tests and reaction questionnaires remained part of the nontaxable service. Participation in an evaluation or mock seminar session, including travel costs, was also nontaxable.

Printed flyers could qualify for the historical printed-sales-message exemption if they were printed to special order, delivered by the seller or its agent through the postal service or a common carrier, and received free by another person who became their owner.

What this means for you

Training and seminar providers

Separate creative and instructional services from mass reproduction, final art, printing, and other transferred property.

Accountants and tax professionals

Review the true object, number and form of copies, whether art is final or preliminary, invoicing, delivery method, recipient cost, and current exemption requirements.

Common questions

Q: Was writing and developing the seminar taxable?

A: No.

Q: Were the initial masters, guides, and presentation materials taxable?

A: No. The source treated them as incidental to the seminar-development service.

Q: Were 350 reproduced binder sets taxable?

A: Yes.

Q: Were evaluation forms and mock-session charges taxable?

A: No.

Q: Was final camera-ready flyer art taxable?

A: Yes.

Citations and references

• California Revenue and Taxation Code §§ 6051 and 6379.5
• California Sales and Use Tax Regulations 1501 and 1541.5(b)

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 515.0012.880
• Original supporting opinion: 515.0012.880 PDF

Original ruling text

STATE OF CALIFORNIA
515.0012.880
STATE BOARD OF EQUALIZATION
(916) 322-6083

January 7, 1991

Re: Preparation of Seminar and Seminar Materials -- -- ---------

Dear Mr. ---:

This is in response to your letter of September 24, 1990, in which you request an opinion concerning the application of California Sales and Use Tax Law to work you performed for [A] Company. I will separately address each of the components listed in your letter.

1. Advise and assist in writing and developing a seminar and the materials used in that seminar by the participants and presenters. Deliverables consist of masters for printing, participants’ guides and making presentation materials. (e.g., overhead transparencies)

A retailer’s retail sale of tangible personal property is subject to sales tax unless specifically exempted by statute. (Rev. & Tax. Code §6051.) On the other hand, the providing of services is not subject to sales tax. (Reg. 1501.) The distinction between the sale of tangible personal property and the transfer of tangible personal property incidental to the performance of a service is one of the true object of the contract. If the true object of the contract is the service itself, the transaction is not subject to sales tax even though some tangible personal property is transferred. Under such circumstances, the service provider is regarded as the consumer of any tangible personal property used in the performance of the service, including property incidentally transferred to the customer.

The activities you describe, including writing and developing a seminar and the materials used in that seminar by participants and presenters, are regarded as services. Therefore, no sales tax applies to your charges for those activities. The delivery of masters for printing, participants’ guides and making presentation materials is incidental to the performance of those services, and thus also not subject to sales tax. Instead, you are the consumer of any materials used in the development of the seminar and materials.

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515.0012.880

2. Reproduction of binders and reproduction materials – 350 sets to be used in the workshops.

Charges for the reproduction of binders and participant materials are subject to sales tax.

3. Writing evaluation instruments. (e.g., test and reaction questionnaires)

These charges are included in services provided to your customer and are not subject to sales tax. In addition, your charges for participating in an evaluation or “mock-up” session of the seminar, including travel costs, are not taxable.

4. Developing and producing the artwork for a flyer. Deliverable is camera ready art.

Sales tax applies to your charges for final art used for actual reproduction by photo- mechanical or other processes or for display purposes. I understand that you separately invoiced your customer for printed flyers advertising the seminars. Revenue and Taxation Code Section 6379.5 exempts from sales tax the gross receipts from the sale of catalogs, letters, circulars, brochures, and pamphlets consisting substantially of printed sales messages for goods and services. Subdivision (b) of Sales and Use Tax Regulation 1541.5 states that tax does not apply to the sale of printed sales messages which are:

(1) (Printed to the special order of the purchaser;

(2) mailed or delivered by the seller, the seller’s agent or a mailing house acting as the agent for the purchaser, through the United States Postal Service or by common carrier; and

(3) received by any other person at no cast to that person who becomes the owner of the printed materials.

Assuming that the above three requirements were met, your charges for the printed flyers are not subject to tax.

I hope this answers your questions. However, if you need further information, please feel free to write again.

Very truly yours,

Janet Vining
Tax Counsel
JV:wk
2663C