Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
515.0000 SERVICE ENTERPRISES GENERALLY—Regulation 1501
(a) IN GENERAL—SERVICE DISTINGUISHED FROM SALE
515.0011.795 Lithographer's Services. An out-of-state retailer who has stores in California and other states hires a California lithographer to produce color separations. The lithographer sends hard copy proofs to the retailer out of state for approval. The retailer may make changes or not, but returns all the proofs after approval. After receipt of the approved proof, the lithographer sends the color separation to a California printer. The printer uses the color separation to print either direct mail advertising material which qualifies as printed sales messages under Regulation 1541.5, or inserts which are placed into newspapers as defined in Regulation 1590(a)(1). The inserts are shipped by the printer both to newspapers within and out of California. The "printed sales messages" are sent free of charge by a California mailing house to individuals both inside and outside the State of California. The retailer believes that the true object of the contract between the retailer and lithographer is the service provided by the lithographer.
The retailer specifically desires tangible personal property, that is, satisfactory color separations to use for printing newspaper inserts and printed sales messages. Hence, the lithographer made a taxable sale of the color separations to the retailer. The lithographer is not providing a mere service but rather is selling tangible personal property by delivering that property to printers in California on its customer's behalf. That sale is subject to tax. 11/25/96.