What was the taxable measure when a company produced and sold compact discs for use as radio commercials?

Plain-English summary

California said compact discs produced and sold for use as radio commercials qualified under Regulation 1527's master-tape and master-record definition. The taxable measure was limited to the sale price of the unprocessed compact-disc medium.

The historical rule excluded recording labor, production and processing services, other production expenses, and copyrightable, artistic, royalty, or other intangible amounts from the measure. It applied the same manner of taxation to subsequent qualifying retail sales.

Common questions

Did a radio-commercial compact disc qualify as a master record?

Yes.

What amount was taxable?

The sale price of the blank compact disc.

Were recording labor and creative elements included?

No, under the stated Regulation 1527 measure.

Was the letter requested for reliance purposes?

Yes. The requester asked for written advice under section 6596.

Citations and references

• California Revenue and Taxation Code section 6596 — written-advice reliance request stated
• California Sales and Use Tax Regulation 1527(b)(1) — master-record definition and taxable-measure framework applied

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/527-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/527-0100.pdf

Original ruling text

527.0100

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 445-6450

February 5, 1990

Mr. K--- E. Y--L---, P--- & Co.
P.O. Box XXXXX
--- ---, TX XXXXX
I---, Inc.
SS --- XX-XXXXXX
Dear Mr. Y---:
This is in reply to your November 14, 1989 letter regarding the application of sales and use tax to charges for compact discs. We understand that I---, Inc., produces and sells compact discs which are produced for use as radio commercials. You asked for written advice from this Board on which I--- can reply [sic] for purposes of Revenue and Taxation Code section 6596. Sales and Use Tax Regulation 1527, Sound Recording, provides that the measure of tax with respect to the retail sale of master tapes or master records embodying sound is limited to the sale price of the unprocessed recording media. The measure of tax does not include charges for labor and recording sound, services rendered in producing, fabricating, processing or imprinting the master tapes, any other services or production expenses or amounts paid for the copyrightable, artistic, or intangible elements of such master tapes or records, whether designated as royalties or otherwise. Tax applies to subsequent retail sales of master records and tapes in the same manner as tax applies to the original retail sale. Subdivision (b)(1) of Regulation 1527 defines “master tapes and master records embodying sound” to mean tapes, records, and other devices, not including mothers, stampers, or finished records, utilized by the recording industry in making recordings embodying sound. The term includes tapes or records which are produced for use as radio commercials or other advertising, syndicated radio programs or for educational purposes. It is our opinion that, if I---, Inc., produces and sells compact discs to be used as radio commercials, the taxable measure with respect to the retail sale of such compact discs is limited to the sale price of the unprocessed recording media (compact discs).

Mr. K--- E. Y---

-2-

February 5, 1990
527.0100

We hope this answers your questions; however, if you need further information, feel free to write again. In such case, please provide a description of the transactions involved. Very truly yours,

Ronald L. Dick
Tax Counsel

RLD:sr