Were a printer's sales of premium trading stamps and saver books sales for resale to stamp companies?
Apply this to your situation
This page answers the general question as of 1954. Ask about yours and see what current California tax law says, with citations.
Plain-English summary
A printer produced merchandise-premium trading stamps and stamp saver books. Its customers sold pads of stamps, gave the books away, and later redeemed filled stamp collections for cash or merchandise.
The printer's sale of saver books was retail and taxable because the customers gave the books away rather than reselling them.
The printer's stamp sales were also retail. Although customers charged merchants for stamps, the price represented the stamp company's promise to provide cash or merchandise on redemption, not the tangible paper's value. The stamps were therefore resold as intangible redemption rights rather than as tangible personal property.
What this means for you
Printers, loyalty-program companies, merchants, and tax professionals
Determine what downstream customers actually sell. A physical item may fail resale treatment when the customer transfers an intangible program benefit rather than the item's tangible value.
Common questions
Q: Why were saver books taxable to the printer's customer?
A: The customer gave them away, so the printer's sale was at retail.
Q: Why were the physical stamps not purchased for resale?
A: The downstream charge bought the redemption agreement, not the paper stamps' physical value.
Q: What was the printer's result?
A: Its charges for both stamps and saver books were taxable retail sales.
Citations and references
- The opinion's historical retail-sale and resale analysis; no code section was specifically cited
Source
- Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
- Annotation page: Annotation 555.0100
- Original supporting opinion: 555.0100 PDF
Original ruling text
555.0100
STATE OF CALIFORNIA
STATE BOARD OF EQUALIZATION
May 17, 1954
Your letter of April 22
Attention:
Gentlemen:
You inquire concerning the application of sales tax to charges for printing merchandise premium and trading stamps and stamp saver books. The purchasers sell the pads of stamps and give away the books. They then cash in the stamps as redemptions. The sales tax applies to retail sales of tangible personal property. A retail sale is defined as "a sale for any purpose other than resale in the regular course of business in the form of tangible personal property." Your customers give away the books and your sale of books is therefore at retail and taxable. While it is true that your customers sell the stamps, they do not sell them in the form of tangible personal property. The price which they charge for the stamps has no relation to the price which they pay for the stamps. The price charged for the stamps is for their intangible value, namely, the agreement by the stamp company to give cash or merchandise when the stamps are presented for redemption. Accordingly, the stamps are being re-sold in the form of intangible property and your sale of stamps is at retail and therefore taxable. Yours very truly, Bill Holden Assistant Counsel BH:ja cc:
Inglewood - Auditing
What does the law say today, for your facts?
This ruling is from 1954. Ezel checks current California tax law against your situation and cites the authority it relies on.
Opens in Ezel Pro.
- Checks the law as it stands today, not only this page
- Cites every source it relies on, so you can verify it
- Chat, drafting and research in one workspace