Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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432.0000 PRINTED SALES MESSAGES—Regulation 1541.5

Annotation 432.0064.515

432.0064.515 Mutual Fund's Promotional Material. The materials listed below are printed by a California printer and delivered directly by the printer to a fulfillment mail house located in California. These materials are printed to the special order of the customer, the mutual fund. These items are then mailed by the fulfillment house through the United States Postal Service to the customer's clients and potential clients. There is no cost to clients or potential clients for the receipt of these materials. Thus, the sale of any such items qualifying as printed sales messages are exempt from tax:

(1) A postcard-type of self mailer which describes company's growth fund. This postage-paid card contains information on both sides promoting the sale of the growth fund. Therefore, it is a printed sales message and its sale is exempt from tax.

(2) Outside envelope with the words "Fund Info" printed on it as well as the name of the fund and return address. If the "outside" envelope is used to package items qualifying as printed sales messages for mailing and it is sold with such items, its sale would satisfy the requirements for the exemption since it would be sold with the printed sales messages for shipment or delivery of the printed sales message. On the other hand, if it is purchased from one source while the printed sales message(s) is purchased from another, its sale would be subject to tax.

(3) A group of pamphlets which is comprised of an annual report dated March 31, 1994, a quarterly report dated June 30, 1994, a semi-annual report dated September 30, 1994, and a quarterly report dated December 31, 1994. The same sequence is followed for the year 1995. Each of these pamphlets are descriptive of the activities regarding the company's "growth fund." This group of pamphlets consist of statements of financial conditions which provide a "track record" of performance of the growth fund and include disclaimers about future performance. These pamphlets are not "printed sales messages" since their principal purpose is not that of advertising or promoting sales of goods or services. Thus, their sale is taxable unless qualifying for another applicable exemption, such as the exemption for sales of certain periodicals.

These quarterly, semi-annual, and annual reports are reports of the financial activities of the "growth fund" during the period reported and are cumulative in nature providing information in regard to the fund over the span of a year. They contain news or information of general interest to a segment of the public. Although there is a change in the title of successive issues to relate to the period for which it is issued, each issue is one of a series, bears a relationship to each other issue, is similar in subject matter to the other issues, and is similar in style and formats to other issues. Hence, the reports qualify as periodicals. Since these periodicals are distributed without charge, the sale by the printer to the customer is exempt from the tax. (4) A prospectus and a brochure for the company's mutual funds. A prospectus is a "printed sales message" since such materials are printed for the primary purpose of promoting the sale of goods or services. Hence, the sale is exempt from tax.

(5) A reply envelope and an account application form. Generally tax applies to sales of reply envelopes and order or application forms unless they are sold as a component or integral part of the printed sales message. Hence, in order for the sale of the reply envelope or application to be exempt from sales tax, they must be stapled, glued, or otherwise affixed to the printed sales message and sold together with the printed sales message. 5/17/96.