California sales tax

I'm not aware of any such change. I can see how the hard copy materials could be subject to California use tax because they are purchased, presumably, for first functional use at the seminar in California (see Reg. Sec. 1620(b)(3)). However, it seems to me that the true object of the contract here (see Reg. Sec. 1501) is the service to be provided at the seminar, and the tangible and intangible (downloaded) materials are incidental to providing that service.

I'd love it if you'd ask the guy to cite chapter and verse. There may be something I'm not aware of here.

Katie in San Diego

First of all, it's not that the transaction isn't subject to sales tax. It is (at least the law claims it is). It's just that it's normally thought that a state has no jurisdiction over someone out of state, and can't demand tax from him because of that.

It looks like this issue would be governed by 18 CCR §1620. It's fairly long, but it appears to say that sales tax is applies on every sale unless the US Constitution prohibits it, or the sale is to a foreign country, or there is some other explicit exemption.

Or it might be that internet downloads aren't "shipped" out of state, so it's not clear where they will be used or delivered, and they tax it on that basis because it might be used in California.

I agree with you that in many cases program material might be incidental to a class, and as a result might not be taxable, similar to how a document drafted by a lawyer is considered primarily services and the document itself is incidental and not taxable.

But if the material isn't a product of the seminar but something that can be used independently from the seminar, it seems to me that the material might be subject to tax if purchased or received separately from the seminar.

I don't know why they would try to tax both, though. There is the general rule that when you purchase goods and also services to make or improve those goods, the entire sale is taxable. Perhaps it's some incorrect application of that.

___ Stu

I wasn't clear. The DVDs were snail-mailed to me (they're a recording of a different seminar that took place several years ago). Similarly, the downloads are recordings of still other past seminars.

The items are all reasonably independent; I could have purchased any combination of them I chose (or other such items, which I chose not to).

Seth

Well, that does change the facts. Are you sure you were charged California sales or use tax, and not Minnesota use tax? If the seller has nexus with Minnesota, the tangible property would be subject to MN use tax, and the seller would be obligated to collect and pay it over to Minnesota. Whether the fee for the seminar, which I presume was separately stated, would be subject to MN tax seems a stretch to me, but I haven't looked at the Minnesota statutes.

Katie in San Diego

Do California and Minnesota have a sales tax compact?

___ Stu

Yes.

He doesn't.

I would expect the seminar to be subject to California taxes (if they tax such services), since that's where it will take place. I don't see why the physical (snailmail) delivered items, or the digital downloads, should be subject to California tax.

Would the answer change if the sale took place in California? (I know there are stores in New York that advertise that they'll ship your purchase to you out-of-state and thereby avoid collecting Sales Tax.)

Seth

There is no sales tax on services in California, so there should be no tax on the workshop per se.

As far as the materials are concerned, the only thing I can think of is what Katie already mentioned - that since the materials go along with the workshop, they will be "used" in CA, and the use tax (if not the sales tax) will apply.

___ Stu

As Stu says, California wouldn't tax the seminar as such, and would include it in the measure of the tax only if it was part of a bundled transaction that included the tangible personal property, with the latter being the true object of the transaction.

Of course if you had purchased the tangible items in California, California sales tax would have applied. Neither California sales nor use tax would apply to property shipped out of California for use outside California. And digital downloads are still not subject to tax in California as far as I know!

I wish you would go back to the vendor and ask him for a citation. Tell him it's just out of curiosity .

Katie in San Diego

PS - some of those NY stores have gotten into serious trouble by shipping empty boxes to the out-of-state customer's home, while the customer walked out of the store with the jewelry or whatever.

Nope, they were all independent purchases.

In fact, they came from a fulfillment house in another state (I don't recall which, but not California or Minnesota).

I'll do that.

I know. The only time I did that, I was buying clothing that needed alteration, so it had to be shipped.

Seth