Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 220.0161

220.0161 Mail Order Merchandise. There are a number of merchandising programs which involve major oil companies, major airlines, and others who enter into agreements with direct mail order firms for the sale of merchandise to customers of the oil companies, etc. Under these programs, brochures and other sales literature promoting various products are mailed to the customers of the oil companies, etc., in an envelope with the customer's periodic credit card statement. Purchases of the advertised products can usually be charged to the customer's credit card. The merchandise is generally shipped to the purchaser by the mail order firm. The oil companies, etc., receive compensation based on the volume of sales generated.

It has been concluded that the oil companies, airlines, etc., should be held as the retailer provided that all of the literature and order forms lead the customer to believe that this is the party with whom they are contracting. If the literature identifies the mail order firm as the seller, that party must be held as the retailer.

In the latter situation, the oil companies, etc., will be considered the agent or solicitor of the mail order firm if the solicitation is from a California location, and the mail order firm will be considered to be engaged in business in California. On the other hand, if the solicitation by the oil companies, etc., is from a location outside California, there will be insufficient participation within this state, and the mail order firm will not be considered as engaged in business in California. The fact that the solicitor or agent may be engaged in business in this state on its own behalf is insufficient participation. Additionally, when a mail order firm contracts with two or more oil companies, etc., and it is disclosed as the seller, it can be held liable for collection of tax on all of its sales in California notwithstanding the fact that the sole solicitation in this state relates to only one of the parties with whom the mail order firm has contracted. 11/19/76; 7/10/96.