Were television research reports nontaxable compilation services or taxable information products when delivered on tangible media in California?

Plain-English summary

California said information did not become exempt merely because information was what the customer received. When information was delivered in tangible form, the question was whether the customer contracted for the information product or for the service of compiling it.

A contract could be for a nontaxable compilation service when the work was performed under that contract. The opinion identified a contract price covering the full cost of compiling the data as the best evidence of a service contract, and said two described report or research offerings might be nontaxable on that basis.

Standardized specialty products and industry-wide market data were taxable when delivered on tangible media. The source's examples included maps, territory data, working studies, annual reports, other general industry-segment reports, and standard microcomputer programs.

Local market surveys were sales of tangible personal property. They had previously qualified as exempt periodicals, but after the periodical exemption was repealed effective July 15, 1991, printed local market surveys sold at retail in California or purchased for California use were taxable.

What this means for you

Research and information providers

Contract language, pricing, customization, compilation work, product standardization, delivery medium, and delivery date can change the classification.

Accountants and tax professionals

Retain contracts and cost support showing whether the customer commissioned compilation services or bought an existing information product, and document whether delivery was tangible.

Common questions

Q: Was every information report nontaxable as a service?

A: No.

Q: What supported service treatment?

A: Performance of compilation under the particular contract, with a contract price covering the full compilation cost identified as the best evidence.

Q: Were standardized reports and programs taxable?

A: Yes, when delivered on tangible media.

Q: What happened to printed local market surveys after July 15, 1991?

A: They were taxable because the periodical exemption had been repealed.

Citations and references

• California periodical exemption repeal effective July 15, 1991, as described in the source

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 515.0019
• Original supporting opinion: 515.0019 PDF

Original ruling text

515.0019

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-8208

April 17, 1992

Mr. L--- F. P--A--- N--- Company
N--- Plaza
N---, IL XXXXX-XXXX
Re:

Television Survey Reports
SR --- XX-XXXXXX

Dear Mr. P---:
This is in reply to your letter dated October 31, 1991, regarding N--- survey reports. In California there is no exemption for sales of information when the information is delivered in tangible form. The only issue is whether a customer has contracted for the information or for the service of compiling the information. The service is not the information; rather, the service is the compiling of the information. If the service of compiling the information is performed pursuant to the contract in question, then the contract is for a service. The best evidence of a service contract is that the contract price covers the full cost of performing the service, i.e., compiling the data. Based on the above, it appears that charges for the N--- P--- reports and the N--- New Media Services research described on pages 36 and 42 of “Y--- G--- to R--- and S---” may be nontaxable. It is our position that “specialty type products” and “industry wide market data,” including general reports on various industry segments and standard micro-computer programs, are taxable when delivered on tangible media. N--- products such as D--- Maps, D---’s by N--- territories, W--W--- Study, A--- R--- on T---, N--- M--- Services, T--- C---, C---, and D---T---, as found in “Y--- G-- to R--- and S---,” are examples of products which are taxable when delivered in California as tangible personal property. Finally, it is our position, as it has been for many years, that sales of the “local market surveys,” as typified by the N--- N--- Station Index – V--- in P---, ---, NY, and the N--- N--- T--Index, N--- T--- R---, September 2-8, 1991, are sales of tangible personal property. These reports previously qualified for exemption as periodicals. However, since the exemption for periodicals

Mr. L--- F. P---

-2-

April 17, 1992
515.0019

was repealed effective July 15, 1991, all printed “local market surveys” sold at retail in California or purchased for use in California after this date are taxable. With respect to one of the audits of N---, our understanding is that a second auditor correctly determined that charges for certain N--- reports were not taxable but made that determination for the wrong reason. These reports were not taxable because they were exempt periodicals, not because the charges were for services. As noted above, the legislature repealed the periodical exemption and these reports are now taxable. If you have any further questions on this matter, please write to us again. Sincerely,

Elizabeth Abreu
Tax Counsel

EA:wk
4101C