Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 220.0055

220.0055 Customer Billings Sold and Mailed Outside State. A California retailer (taxpayer), a printing and manufacturing broker of recycled paper, has a contract to manufacture and print the phone bill invoices and the envelopes in which the phone bills are mailed to the phone company's customers.

The paper that the taxpayer purchases is shipped from a mill in Canada to a location outside California where a company manufactures and prints the phone bill invoices and the envelopes. After the phone bill invoices and envelopes are manufactured, they are delivered to a data-processing vendor's facility located outside of California. The data processing vendor is directly hired by the phone company. It is responsible for laser-printing the individual phone bills that list the actual calls made during a given month, stuffing the phone bills into envelopes, and mailing them. The phone company has customers in all 50 states, so a portion of the bills are mailed to California customers from an out-of-state location.

Since the retail sale of the paper and the printing occurs outside of California, the sale is not subject to the sales tax. Also, the phone company is regarded as the consumer of bills and invoices sent to its customers to reflect the company's monthly charges. Thus, since the phone company's vendor inserts the bills into envelopes and mails them to California customers from a location outside this state, the phone company's use has occurred outside California. Therefore, the phone company is not regarded as purchasing the bills or envelopes for use in California and the taxpayer is not required to collect the use tax from the telephone company. 8/12/94.