Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 220.0090

220.0090 Distribution of Notepads to College Students. An out-of-state retailer is to be retained by certain businesses to produce special order notepads. These pads will bear the name of a participating college and the name of the sponsoring business. The pads will be distributed in bulk to the participating college for distribution to its students as part of the school's registration package. The bulk pads will be delivered to the colleges by common carrier. Each pad sponsor will pay to the out-of-state retailer a price for each pad plus a distribution royalty which is also based on a per pad price. The distribution royalty will then be forwarded by the out-of-state retailer to the colleges.

Since the out-of-state retailer pays the colleges a distribution royalty for delivering the notepads to the students, the colleges act as agents operating in this state under authority of the out-of-state retailer. Therefore, the out-of-state retailer is "engaged in business in this state" and is required to collect use tax from the sponsors measured by the sales price of the note pads delivered in California. 12/20/89.