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 16 - Resale Certificates; Demonstration; Gifts and Promotions › Section 1670 - Gifts, Marketing AIDS, Premiums and Prizes

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Gifts. Persons who make gifts of property
				  to others are the consumers of the property and the tax applies with respect to
				  the sale of the property to such persons.
(b) Marketing Aids. The tax applies to sales
				  of advertising material, display cases, counter display cards, racks, and other
				  similar marketing aids to persons acquiring such property for use in selling
				  other property to customers. A marketing aid is deemed to be "sold" if a
				  consideration at least equivalent to 50 percent of the purchase price of the
				  aid is obtained from the customer, either by the making of a separate charge or
				  by increasing the regular sales price of other merchandise sold to the customer
				  and delivered with the marketing aid.
Manufacturers or others who provide marketing aids to
					 persons engaged in selling their products without obtaining reimbursement
					 equivalent to 50 percent of the purchase price of the aid are deemed to be the
					 consumers of the property provided. In such case the sales tax applies to the
					 sale to or the use tax applies to the use by the manufacturer or other person
					 purchasing the aid for distribution whether it is delivered directly to the
					 person engaged in selling its product or is delivered to a distributor,
					 wholesaler, or jobber for redelivery to such person with "deal merchandise."
					 Distributors, wholesalers, or jobbers are the retailers of aids which they
					 "sell" to persons engaged in marketing their products.
(c) Premium Delivered With Goods Sold. When a
				  person delivers tangible personal property as a premium together with other
				  merchandise sold, and the obtaining of the premium by the purchaser is certain
				  and not dependent upon chance or skill, the transaction is a sale of both
				  articles. Tax applies to the gross receipts received from the purchaser for the
				  goods and the premium except when the premium is delivered along with a food
				  product for human consumption or other exempt item. In such case tax applies to
				  the gross receipts from the sale of the premium, which will be regarded as the
				  cost of the premium to the retailer, in the absence of any evidence that the
				  retailer is receiving a larger sum. If there is no such evidence, and if sales
				  tax or use tax has been paid measured by the sale price of the premiums to the
				  retailer, no further tax is due.
(d) Prizes. The operator of a game who
				  delivers a prize to each customer is regarded as the retailer of the
				  merchandise delivered as prizes, and the tax applies to the operator's total
				  gross receipts. The awarding of such prizes is not regarded as dependent upon
				  chance or skill, inasmuch as the customer for each game played is certain to
				  receive a prize. Similarly, the tax applies to the entire receipts from
				  operators of "grab bag" concessions by which the customer always receives some
				  tangible personal property. If the prize consists of a food product, the tax
				  does not apply.
An operator who delivers both food items and nonfood items
					 as prizes may take a deduction of that percentage of his total receipts which
					 equals the percentage of the cost to him of the food items to the total cost to
					 him of all merchandise purchased for delivery as prizes.
The operator of a game who awards property as a prize the
					 winning of which depends upon chance or skill is the consumer of the property
					 and tax applies with respect to the sale to or the use of the property by the
					 operator.
"Free" Meals, see Regulation 1603. Exemption Certificates,
					 see Regulation 1667.
1. Amendment
					 and renumbering of former Section
					 2072 filed 11-5-69; effective
					 thirtieth day thereafter (Register 69, No. 45).
2. Amendment of
					 subsections (c) and (e) filed 12-29-78; effective thirtieth day thereafter
					 (Register 78, No. 52).
3. Amendment filed 12-6-79; effective
					 thirtieth day thereafter (Register 79, No. 49).
4. Repealer of
					 former subsections (b) and (f), relettering and amendment of former subsection
					 (c) to subsection (b), and relettering of former subsections (d) and (e) to
					 subsections (c) and (d) filed 12-29-88; operative 1-28-89 (Register 89, No.
					 2).
Note: Authority cited: Section
						7051,
						Revenue and Taxation Code. Reference: Sections
						6007-
						6009,
						6015
						and
						6365,
						Revenue and Taxation Code. Charitable Organizations, see Regulation
						1570.