Was a patent draftsman a retailer of tangible personal property or a provider of professional services?

Plain-English summary

California revisited an earlier review of a patent draftsman's operations.

The source called the issue close, like questions involving maps, engineering and drafting work, architects' drawings, lawyers' briefs, accountants' financial statements, and engineers' reports.

On the reviewed facts, the patent draftsman's work was essentially the performance of professional services rather than the retail sale of tangible personal property.

California therefore took no further action to determine tax liability for that patent-drafting work.

What this means for you

Patent and technical-drafting businesses

The result was fact-specific and depended on the work being primarily professional services rather than production and sale of drawings as property.

Accountants and tax professionals

Document who develops the technical content, customer inputs, professional judgment, drawing formats, reproductions, separate charges, and licensing or ownership terms.

Common questions

Q: Was the patent draftsman treated as a retailer?

A: No.

Q: Did California view the classification as obvious?

A: No; the source called it a close question.

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 515.1220
• Original supporting opinion: 515.1220 PDF

Original ruling text

515.1220

May 26, 1955
Your letter of April 22 addressed to Harry L. Say, Sales Tax Administrator, concerning the sales tax liability of patent draftsmen, has been referred to the undersigned for reply. As you point out, this matter has previously been considered in connection with the operations of a certain individual, Mr. REDACTED TEXT, engaged in this type of work. Following a review of the facts we reached the conclusion that the operations of Mr. REDACTED TEXT as a patent draftsman did not constitute him a retailer of tangible personal property. This information was transmitted to our District Tax Administrator in Los Angeles under date of December 10, 1952, in a memorandum which contained the following statement: “The matter is undoubtedly a close question as are so many of the problems arising in connection with the making of maps, performance of engineering and other professional services, drafting work and the like. We believe the work of Mr. REDACTED TEXT falls on the side of the line representing essentially the performance of services rather than selling tangible personal property along with architects’ drawings, lawyers’ briefs, accountants’ financial statements, engineers’ reports, etc. Accordingly, it will not be necessary to take any further action with respect to Mr. REDACTED TEXT in so far as his work as a patent draftsman is concerned.” Accordingly, no further action was taken toward making a determination of tax liability with respect to Mr. REDACTED TEXT work as a patent draftsman. Very truly yours, E. H. Stetson Tax Counsel