Was selling internet advertising space subject to California sales or use tax?

Plain-English summary

A business sold advertising space on the internet to customers over the telephone. It asked whether those advertising-space charges were taxable.

The letter explained that sales tax applies to retail sales of tangible personal property and defined that property as something perceptible to the senses. On the stated facts, the advertiser received no tangible personal property.

The advertising-space sale was therefore not subject to sales or use tax. If the seller also provided tangible personal property, the source said the charges for that property would be taxable.

Citations and references

• California Revenue and Taxation Code §§ 6006(a), 6016, and 6051
• Business Taxes Law Guide Annotation 540.0015, cited in the source

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 540.0346
• Original supporting opinion: 540.0346 PDF

Original ruling text

540.0346

STATE OF CALIFORNIA

JOHAN KLEHS
First District, Hayward

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
TELEPHONE: (916) 324-2614
FAX : (916) 323-3387

DEAN F. ANDAL
Second District, Stockton
ERNEST J. DRONENBURG, JR.
Third District, San Diego

February 26, 1997

Mr. D--- E--XXXX --- Place
---, CA XXXXX

KATHLEEN CONNELL
Controller, Sacramento
___
JOHN CHIANG
Acting Member
Fourth District, Los Angeles
_____
E. L. SORENSEN, JR.
Executive Director

Dear Mr. E---:
This is in response to your letter dated January 21, 1997, regarding the application of tax to your sales of advertising space on the internet. You state that your business consists of selling advertising space on the internet to purchasers over the telephone. You ask if tax applies to your sales of the advertising space. DISCUSSION Retail sales of tangible personal property in California are subject to sales tax, measured by the gross receipts, unless the sale is specifically exempt from taxation by statute. (Rev. & Tax. Code § 6051.) Revenue and Taxation Code section 6006, subdivision (a) defines “sale” as a transfer of title or possession, in any manner or by any means whatsoever, of tangible personal property for a consideration. Tangible personal property is personal property which can be seen, weighed, measured, felt or touched, or which is in any manner perceptible to the senses. (Rev. & Tax. Code § 6016.) Our understanding is that you do not transfer any tangible personal property to the purchaser of the advertising space on the internet. Where the sale of advertising space involves no transfer of tangible personal property to the purchaser of the advertisement, no sales or use tax applies to such sale. (See BTLG Annot. 540.0015 (11/21/94).) If you provide any tangible personal property to the purchaser, your charges for the tangible personal property would be subject to tax. If you have any further questions, please write again. Sincerely,

Sophia H. Chung
Tax Counsel
SHC:rz
cc: Oakland District Administrator (CH)