Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2011
Sales and Use Tax Annotations
349.0000 MEMBERSHIP FEES—Regulation 1584
349.0500 Industry Information Provider. The "provider" is a corporation which provides nationwide services to a specific industry. The provider has an office and employees in California but its headquarters are located outside of the state. The provider gathers certain industry related information, analyzes the aggregate information, and then makes the information and a statistical analysis of the information available via noncustomized publications and reports provided to its members. Generally, all members subscribing for a specific service will receive the same publications and reports. These publications also are available electronically. No member receives a publication or report containing solely its own information. The publications and reports do not qualify as subscriptions of periodicals as described in Regulation 1590(b)(3). Only companies providing a specific type of product may become members. The two-part membership fee consists of a flat fee for membership for a specific state and a variable fee based upon the member's sales of the product in the state.
The provider provides its members with a variety of benefits besides the publications and reports. These benefits include providing customized information to individual members by contract; providing third party information such as credit reports; sending newsletters about the industry; holding membership meetings; filing information on behalf of members with regulatory bodies; and occasionally, representing the industry in other situations, such as before legislative bodies.
Under these particular facts, the provider is primarily a service organization and the charges for membership fees are not related to anticipated retail transactions. Therefore, under subdivision (a)(2) of Regulation 1584, charges for the provider's membership fees are not subject to the tax.
The separately stated charges for noncustomized publications, reports, and contracts which a purchaser receives in the form of tangible personal property are subject to tax since the purchaser's primary interest is in obtaining the physical property, whether purchased by a member or a nonmember. However, if the publication, reports, or form contracts are delivered to the purchaser electronically by remote telecommunication, there is no transfer of tangible personal property and, therefore, the charges are not subject to tax. On the other hand, developing customized information for a member and providing it through a custom report to the member is a nontaxable service since the true object of the contract is the service of receiving the customized information, not the property produced by the service. 4/12/96.
349.2000 Realtors' Trade Associations. Membership fees paid to the various trade associations of realtors are not subject to tax because they are not related to anticipated retail sales. The true object of membership is that the members are entitled to avail themselves of the extensive services provided by these trade associations. The fact that members may be entitled to purchase certain products or that certain products are sold at a discount is only an incidental and nominal benefit to the true object of membership. Thus, the membership fees are not subject to sales tax. 1/25/96.