Was an additional charge for storing a customer's printed materials taxable after the print sale was complete and title had passed?

Plain-English summary

A printed-goods vendor sold materials and stored them on its premises for one year. After the anniversary, a customer could choose and pay for additional storage.

California treated the later storage charge as a nontaxable service if the print sale was already complete, title had passed to the customer, and the vendor had not conditioned the property sale on continued storage.

Storage charged before the sale and passage of title, or required as a condition of buying the printed materials, was part of taxable gross receipts from the sale.

Because the requester did not identify the client, the opinion was general hypothetical advice and did not qualify for reliance relief under Revenue and Taxation Code § 6596.

What this means for you

Printers and fulfillment providers

Document when the print sale ends, when title passes, and whether storage is a later customer choice.

Accountants and tax professionals

Review contracts, invoices, title terms, mandatory holding periods, separately priced extensions, and the facts disclosed in any written-advice request.

Common questions

Q: Was optional storage after the first year taxable?

A: No, if the sale was complete and title had passed.

Q: Was pre-sale storage taxable?

A: Yes, as part of the property sale.

Q: What if the customer had to store the goods with the printer?

A: The storage charge was taxable.

Q: Could the unidentified vendor rely on the letter for statutory relief?

A: No.

Citations and references

• California Revenue and Taxation Code §§ 6012, 6051, and 6596
• California Sales and Use Tax Regulation 1501

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 515.0035
• Original supporting opinion: 515.0035 PDF

Original ruling text

515.0035

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
(916) 324-8208

January 27, 1992
REDACTED TEXT
Re: Storage of Printed Goods
Dear REDACTED TEXT,
This is in response to your letter dated December 6, 1991, in which you state: “We have a client who is a vendor of printed goods. On occasion our client enters into an agreement with a customer, along with the sale of the printed goods, to ‘store’ the goods on the client’s premises for one year. “Once the first year anniversary is reached, our client may have a customer who decides that they would like to continue the ‘storage’ agreement. Our client is invoicing their customer for this additional storage time and is not sure whether or not to charge sales tax on this storage charge. “We would like to know how the state of California views our client’s sales tax liability concerning this type of transaction.” Sales tax is measured by the gross receipts from the sale of tangible personal property. Rev. & Tax. Code § 6051. Gross receipts includes the total amount of the sales price without any deduction for service or labor costs. Rev. & Tax. Code § 6012. On the other hand, the charge for a service which is not related to the sale of tangible personal property is not part of taxable gross receipts. Sales and Use Tax Regulation 1501. We assume that your client does not begin charging for storage until he or she has completed the sale of the printed materials and passed title to the customer. We further assume that your client does not condition the sale of the printed materials upon storage of such materials with the client. If this is the case, the storage charges are nontaxable charges for a service. If, however, the client charges for storage prior to the sale and passage of title or conditions the sale upon storage with the client, such charges are part of the gross receipts from the sale and therefore taxable. Revenue and Taxation Code section 6596 provides the only basis for relief from tax if a taxpayer relies on incorrect written advice from the Board. The primary conditions to qualify are that the request for opinion must be in writing and must disclose all relevant facts, including the identity of the taxpayer. Since you have not identified your client, this opinion does not come

January 27, 1992

2

515.0035

within the provisions of section 6596 but rather is simply general advice regarding a set of hypothetical facts. If you have further questions regarding California sales and use tax law, please do not hesitate to write again. Sincerely, Elizabeth Abreu Tax Counsel EA:cl REDACTED TEXT bc: Out-of-State District Administrator