Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
385.0000 NEWSPAPERS AND PERIODICALS—Regulation 1590
(a) IN GENERAL
385.0287 Local Printing Plants. An out-of-state newspaper publisher has no retail operations in this state. The publisher develops the content of the newspapers outside California and then electronically transmits it to a publisher who is engaged in business in California. From the in-state publishing plant, a common carrier delivers the newspapers to an unaffiliated California newspaper company. The unaffiliated newspaper company then transports the newspapers to numerous drop-off points. Local carriers then deliver the newspapers from these locations to the California subscribers. Subscriptions to the newspaper are sold through sales offices located out of state. No newspapers are delivered directly to subscribers from the printing plant.
In order for its sales to be subject to sales tax an out-of-state retailer must engage in the kind of activities "significantly associated with the retailer's ability to establish and maintain a market in this state for the sales." In the above case, the out-of-state publisher has no places of business of any kind in this state and independent contractors both print and deliver the newspapers. The local individual newspaper carriers are not retailers of the newspapers and, as a result of all these conditions, the sale of the newspapers can only be subject to use tax. Therefore, the out-of-state publisher should obtain a Certificate of Registration—Use Tax and should report the local use tax to the locations of its subscribers using Schedule B of its tax return.
Since the out-of-state publisher has no places of business of its own in California, for purposes of reporting Transactions and Use Tax any nexus for collecting district use tax must come through its agents in state. If the in-state publishers' facilities are located in a district that imposes such a tax then, under Regulation 1827(c)(2), the out-of-state publisher is engaged in business in that district and must collect the district use tax on sales to subscribers in those districts.
If the unaffiliated newspaper company is located in a district that imposes a district use tax, the out-of-state publisher is not required to collect that tax on sales to subscribers in the district. Regulation 1827(b)(1) provides that a taxpayer engaged in business in a district is not required to collect that district's use tax unless it ships or delivers the property into that district. If the unaffiliated newspaper company is located in such a district, clearly the out-of-state publisher is also engaged in business in that district since it has an agent there. However, since the newspapers are sold at the in-state printing plants (because they are sold pursuant to the subscription as soon as they come into being and are identified to the contract), the redelivery of the newspapers to the unaffiliated newspaper company constitutes an event along the distribution chain that occurs after the sale. (7/15/03). (2004–2).