California Code of Regulations › Title 18 - Public Revenues › Division 2 - California Department of Tax and Fee Administration- Business Taxes (State Board of Equalization- Business Taxes, See Ch. 6 and 9.9) › Chapter 4 - Sales and Use Tax › Article 1 - Service Enterprises › Section 1502.1 - Word Processing

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a)
				  General. Tax does not apply to charges for furnishing original letters or
				  documents, or carbon copies produced simultaneously with the original, prepared
				  by using a typewriter or word processing equipment. Where the word processing
				  company provides only an original letter or document, or carbon copies produced
				  simultaneously with the original, the true object of the contract is the
				  performance of a service and not the furnishing of tangible personal property.
				  The word processing company is the consumer of tangible personal property used
				  in providing the service.
Tax applies to charges for producing multiple copies of
					 letters, manuscripts, or other documents using word processing equipment.
					 Multiple copies include form letters produced with a slight variation which
					 personalizes essentially the same letter. Tax applies to the entire charge
					 without deduction for charges for setting up the machine, keyboarding, or
					 assembling the material. Charges for providing additional copies are subject to
					 tax regardless of whether the original was prepared using a typewriter or word
					 processing equipment and regardless of whether the copies are produced by
					 computers, word processors, copying machines, or other methods.
Tax does not apply to charges made by a word processing
					 company for keyboarding original names and address, setting up and sorting, and
					 for printing the names and addresses onto mailing labels. (See Regulation 1504
					 for an explanation of how tax applies to mailing services.)
Tax does not apply to charges made when a word processor is
					 used to produce copy which is acquired and used exclusively for reproduction
					 purposes since Revenue and Taxation Code Section
					 6010.3
					 excludes typography from the definition of sale or purchase.
(b) Examples of the Application of Tax under
				  Specific Circumstances.
(1) Preparation of
				  Standard Letters and Envelopes for Mailing. A word processing operator
				  keyboards and records an address list and standard letter on magnetic media.
				  The letter is then automatically typed to each person on the address list. The
				  prerecorded address list is then used to address envelopes inserted into the
				  machine. The charges made for setting up the machine, keyboarding the material
				  and typing out the letters are taxable. The charges made for addressing the
				  envelopes are nontaxable if separately stated (See Regulation 1504.)
(2) Manuscripts. An author brings a
				  manuscript to a word processing company. The operator keyboards the material
				  and records it on magnetic media. A draft copy of each page of the recorded
				  material is printed out (typed automatically) and given to the author to
				  proofread. The author makes corrections and changes on the draft and returns it
				  to the operator. The operator makes the necessary changes using a word
				  processor. A final copy is then printed out for the author to submit to a
				  publisher. The charges made for the original keyboarding of the manuscript,
				  printing out the draft copy, editing, and printing out a final copy are
				  nontaxable. Tax does not apply to charges for carbon copies prepared at the
				  same time as the original copy; however charges for photocopies are
				  taxable.
(3) Assembling Final
				  Product From a Paragraph Library. An attorney brings several paragraphs to a
				  word processing company which uses word processing equipment to keyboard and
				  record the paragraphs on magnetic media to form a "paragraph library." The
				  attorney then notifies the company to select certain stock paragraphs, for
				  example paragraphs 1, 8, 11, 29, 16, 12, 87, 100, 56, and 57 in that order, to
				  create a will for his client. The attorney provides variable information to be
				  inserted into proper position in the paragraphs, such as: maker of the will,
				  maker's spouse, maker's children and their date of birth, city and county of
				  residence. The operator instructs the machine (with keyboard commands) to
				  assemble those specified paragraphs with the necessary variable client
				  information and to print out (automatically type) a will. All of the charges
				  made for keyboarding original paragraphs, printing out a draft of all
				  paragraphs for the attorney's use, assembling the paragraphs as requested, and
				  printing out individual wills (and any carbon copies of the original) are
				  nontaxable. Charges for photocopies are taxable.
(4) Addressing Mailing Labels. A client has a
				  list of 2,000 names that he is going to use monthly for a mailing. Every month
				  the list has to be sorted into ZIP code sequence, typed on labels to be applied
				  to envelopes which are then mailed. The word processing company keyboards the
				  names and addresses and records them on magnetic media. The machine is
				  instructed (using keyboard commands) to sort the names into correct ZIP code
				  sequence before the list is finally stored on the magnetic media. Each month
				  the equipment is set up and, with an operator in attendance (giving keyboard
				  commands), the names are printed (automatically typed) onto continuous form
				  labels. The charges made by the word processing company for keyboarding
				  original names and addresses, for setting up and sorting, and for the monthly
				  setting up and printing of names onto labels are all nontaxable charges for
				  addressing.