Which charges of a company that copied subpoenaed records and served process were taxable, and which legal-process charges were not?

Plain-English summary

A company prepared and obtained subpoenas, served them, copied the responsive records or other materials for the parties, and returned the originals to the provider.

California said transferring photocopies in California was a retail sale of tangible personal property. Taxable gross receipts included the total sale amount without deductions for property, materials, labor, services, or other production expenses.

The opinion treated Appendix A item 1 as taxable when it represented the company's costs of producing photocopies. Items 2 through 4, for preparing subpoenas and certificates of no record, were nontaxable. Items 5 through 6.4 were taxable.

Items 7 and 8 were taxable if they were costs incidental to selling photocopies; the opinion distinguished a transaction in which requested information was only sent by telefacsimile and no tangible property was delivered. Item 9, skip tracing to serve the subpoena, was nontaxable. Item 10 was taxable if it was a service forming part of the photocopy sale, and items 11 through 14 were taxable.

The source directed transportation-charge treatment to Regulation 1628. Because Appendix A is not reproduced in the official PDF text, this page does not invent descriptions for the remaining item numbers.

What this means for you

Copying and process-serving businesses

Separate subpoena preparation, no-record certificates, skip tracing for service, photocopy production, sale-related services, and transportation on invoices and in supporting records.

Accountants and tax professionals

Classification depends on what each charge pays for and whether tangible copies are delivered. Retain the fee schedule or appendix that maps descriptions to numbered charges.

Common questions

Q: Were charges for the photocopies taxable?

A: Yes.

Q: Were subpoena preparation and certificates of no record taxable?

A: No.

Q: Was skip tracing taxable?

A: Not when it was for serving the subpoena.

Q: Does the source identify every numbered fee?

A: No. It states the tax treatment by item number, but the referenced Appendix A is not reproduced in the official PDF text.

Citations and references

• California Revenue and Taxation Code §§ 6006, 6012, and 6051
• California Sales and Use Tax Regulations 1528(a)(2) and 1628

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 515.0030
• Original supporting opinion: 515.0030 PDF

Original ruling text

515.0030

STATE OF CALIFORNIA

MEMBER
First District

STATE BOARD OF EQUALIZATION
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-6450

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego

August 30, 1993

MATTHEW K. FONG
Fourth District, Los Angeles
GRAY DAVIS
Controller, Sacramento

Mr. R--- J. F--President
F--- & A--XXXX --- --- Highway, Suite XXX
---, CA XXXXX-XXXX

BURTON W. OLIVER
Executive Director

Dear Mr. F---:
This is in reply to your August 6, 1993 letter regarding the application of sales tax to the following facts you provided concerning charges by persons who perform photocopying and process serving: "Generally, a company is retained by a defense attorney to prepare and secure a subpoena for records, documents, X-rays, pathology slides, etc.; to serve the subpoena once issued by the court; copy the subpoenaed records and other materials for delivery to all parties in the action; and return the subpoenaed records and other materials to the party providing the same." As you know, the transfer of the photocopies by the photocopy company in this state is a retail sale of tangible personal property subject to sales tax. (Rev. and Tax. Code Sections 6006, 6051.) The taxable gross receipts include the total amount of the sale with no deduction for the cost of the property sold, materials used, labor or service cost, or any other expense. (Rev. and Tax. Code section 6012, subd. (a).) The general rule applied to charges for photocopies of records is set forth in Sales and Use Tax Regulation 1528, Photographers, Photostat Producers, Photo-finishers and X-ray Laboratories, at subdivision (a)(2). A copy of the regulation is enclosed for your further information. You cited two Business Taxes Law Guide Annotations for our review. Annotation 515.0190 is a statement of the general rule noted above. A photocopy service must include in its taxable gross receipts the charge by the doctor for furnishing a patient's medical records. The charge is one of the "other expenses" which are not deductible from the taxable gross receipts. (Rev. and Tax. Code section 6012, subd. (a)(2).) Annotation 515.0193 states the rule provided in the fifth paragraph of subdivision (a)(2) of Regulation 1528. You asked that we address the taxability of the specific charges you noted on Appendix A of

Mr. R--- J. F---

-2-

August 30, 1993
515.0030

your letter, copy attached.
Tax applies to the charges in item 1 of the Appendix where the charges are merely costs to the photocopy company to produce the photocopies. Tax does not apply to charges 2 through 4 for preparing the subpoenas and certificates of no record. Tax applies to charges 5 through 6.4. Tax applies to charges 7 and 8 if the charges are for costs incidental to the sale of the photocopies. We assume that you do not mean that the photocopy company merely sends the requested information by telefacsimile such that it does not deliver tangible personal property to its customer. Tax does not apply to charge 9 if the skip tracing is for the purpose of serving the subpoena. Tax applies to charge 10 if it is a service that is part of the sale of the photocopies. Tax applies to charges 11 through 14. The application of tax to charges for transportation of the photocopies is provided by Sales and Use Tax Regulation 1628, Transportation Charges. A copy of the Regulation is enclosed. If you have any questions regarding this, I will be on vacation for approximately three weeks beginning August 30. However, Ms. Elizabeth Abreu has recently researched and written on this area of the law. You may contact her at (916) 324-8208. Very truly yours,

Ronald L. Dick
Senior Staff Counsel
RLD:plh

Enclosures
cc:

Ms. Elizabeth Abreu