Ezel / Tax Rulings / CA

Was a $1 membership decal that identified eligibility for merchandise discounts a taxable retail sale?

Short answer No. The member paid for the discount privilege, and the decal merely identified that right. The organization was the consumer of the decals, so tax applied to its purchase from the decal seller.
State
CA
Ruling
Annotation 540.0220
Tax type
Sales and Use Tax
Issued
1956-06-12
Issued by
California State Board of Equalization
Requested by
A representative of an organization furnishing discount-identification decals to members (identity redacted)
Topics
intangible rights consumer use
Source
View Original PDF

Apply this to your situation

This page answers the general question as of 1956. Ask about yours and see what current California tax law says, with citations.

Currency note: this ruling is from 1956
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an undated California State Board of Equalization Tax Counsel letter published by CDTFA as support for a sales and use tax annotation; the official annotation metadata supplies the June 12, 1956 date used here. It addresses $1 decals costing about six cents each that identified members as entitled to reduced merchandise prices. Another taxpayer should not treat this historical staff opinion as binding and should check current membership, discount, identification-item, consumer-use, sales-tax, and use-tax rules. This summary is informational only and is not legal or tax advice.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Plain-English summary

An organization furnished members with decals for $1 each. Displaying a decal identified the member as entitled to buy merchandise at reduced prices from certain filling stations; each decal cost the organization about six cents.

The letter treated the $1 payment as consideration for the discount privilege, not for the physical decal. It compared the decal to a receipt or membership badge that merely evidenced the holder's right.

The organization's transfer to the member was therefore not a taxable sale of tangible personal property. The organization was instead the consumer of the decals, and sales tax applied to the decal seller's charge to the organization.

The supporting letter itself does not print a date. The June 12, 1956 date comes from the official annotation metadata.

Citations and references

  • The source letter cites no statute, regulation, or case by number.

Source

Original ruling text

540.0220

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
Dear Mr. ______,
We believe, from the facts stated in your letter of May 23, that the sale of decals to members at a price of $1, which authorizes them to receive merchandise at a reduced prices from certain filling stations, is not a sale of tangible personal property in the sense contemplated by the Sales and Use Tax Law. You state that the decals cost approximately six cents each. We believe that the decals merely service to identify the holder as entitled to the reduced price and that the amount of $1 that he pays is for the privilege of making a purchase at a reduced price, the decals being furnished merely to identify the holder as entitled to this privilege. It is our belief that the decals are merely in the nature of a receipts for the payment of $1 much as badges are furnished to evidence payment of memberships in organizations and similar privileges, and the tax properly applies to the sale price of the decals to the company furnishing them to members. Very truly yours,

E. H. Stetson
Tax Counsel

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