Ezel / Tax Rulings / CA

Were fees for exchanging one type of trading stamp for another subject to sales or use tax?

Short answer No. The source treated the stamps as intangible rights whose value came from the issuer's premium-redemption obligation, so the exchange business owed no sales or use tax and needed no seller's permit or returns for that activity.
State
CA
Ruling
Annotation 540.0380
Tax type
Sales and Use Tax
Issued
1960-06-15
Issued by
California State Board of Equalization
Requested by
A prospective trading-stamp exchange operator (identity redacted)
Topics
trading stamps intangible rights seller permits
Source
View Original PDF

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This page answers the general question as of 1960. Ask about yours and see what current California tax law says, with citations.

Currency note: this ruling is from 1960
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 a California State Board of Equalization Associate Tax Counsel letter dated June 15, 1960, published by CDTFA as support for a sales and use tax annotation. It addresses a proposed business charging about 25 cents per book plus mailing costs to exchange mixed trading stamps for a single kind, and bases intangible treatment on the issuing company's premium-redemption obligation rather than the paper. Another taxpayer should not treat this staff opinion as binding and should check current loyalty, trading-stamp, redemption-right, exchange-fee, mailing-cost, seller-permit, 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

A proposed exchange business would help customers consolidate different trading stamps into one kind so they could qualify for premiums sooner. It planned to charge about 25 cents per book plus mailing costs.

The letter treated trading stamps as intangible property because their value came entirely from the stamp company's obligation to provide premiums upon redemption, not from the printed paper itself.

The exchange fees were therefore outside sales and use tax. The source also said the operator would not need a seller's permit or file returns for that trading-stamp exchange activity.

Citations and references

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

Source

Original ruling text

540.0380

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
June 15, 1960
Dear Miss ______,
Your letter of May 4 to our Riverside office has been referred to this office for reply. You propose to start a trading stamp exchange business. You would exchange stamps with people so that they could accumulate stamps of a single kind rather than of several kinds. In this way, they could obtain premiums in a shorter time. You would charge about 25¢ per book of stamps, plus mailing costs. This Board administers the Sales and Use Tax Law. The Sales and Use Tax Law applies to the sales of tangible personal property. It is our opinion that trading stamps are intangible property rather than tangible personal property. The reason for this opinion is that the value is exclusively based on the obligation assumed by the trading stamp company to issue premiums when the stamps are presented for redemption. No person would consider the stamps of any value solely for the paper they are printed on. Since you are dealing in intangible property, you would not be subject to any sales or use tax, nor would you be required to obtain a seller’s permit or file returns. Very truly yours,

Bill Holden
Associate Tax Counsel

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