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
515.0033 Material Distributed to Students. A local unit of a national yachting organization promotes skill and safety in handling of small recreational boats through a system of formal education. All course material is prepared by the national organization and distributed for a small fee to local units for use in their classes. The local units distribute the material, collect the fees from each student and forward the fees to the national organization. Also, a small charge is made for use of test documents which are returned to national after each examination for grading.
The course materials provided to the students are considered instructional matter, not consumable supplies and materials. Since a separate charge is made to the students for the instructional items, such charges are subject to sales tax. The exemption under section 6409 (health and safety materials) is not applicable since this exemption is a use tax exemption, not a sales tax exemption.
With respect to the fees paid by the students for tests, the fees are not subject to tax. The local unit is rendering a service. The local unit, however, must pay the use tax on its cost for the test material unless the section 6409 exemption applies. To qualify for the section 6409 exemption, an organization must qualify for the "welfare exemption" under Revenue and Taxation Code section 214. 1/6/92.