Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales And Use Tax Court Decisions

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Intellidata Incorporated v. State Board of Equalization . . . (1983)

Keypunch Activities Are Subject to Tax

Customers delivered raw data to taxpayer, a computer service bureau, with instructions to transpose the data onto cards that could be read by the customer's computer. After the cards were read by the computer they were of no further use to the customer and were usually destroyed or recycled.

Taxpayer purchased the cards and paid the tax on them. Taxpayer considered the consumption of the cards to be part of the hourly rate it charged its customers for the keypunching and did not bill a separate amount for the cards. The cost of the cards constituted 2 percent of the overall cost to the customer.

Taxpayer filed a claim for refund for tax paid to the Board on the gross receipts from the keypunching activities. At trial, the court ruled that taxpayer was not entitled to a refund.

On appeal, taxpayer contended that the gross receipts from the sale of keypunching services are exempt from sales tax because the true object of the transactions between taxpayer and its customers is the service rendered, not the media on which the services are delivered.

The appellate court concluded that taxpayer's keypunching activities produced tangible personal property to the special order of its customers, and was subject to tax pursuant to Section 6006(f) of the Revenue and Taxation Code. Intellidata Incorporated v. State Board of Equalization (1983) 139 Cal.App.3d 594.