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Business Taxes Law Guide—Revision 2024
Sales And Use Tax Court Decisions
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Capitol Records, Inc. v. State Board of Equalization … (1984)
Master Sound Tapes Were Properly Taxable Prior to 1975 Legislation
Prior to 1975, taxpayer purchased original and duplicate master sound tapes made by other production companies, paid royalties and production costs to independent production companies to acquire master tapes, and furnished duplicate master tapes to other production companies under license agreements. The Board imposed sales and use taxes on these transactions, and taxpayer filed suit for refund. The trial court granted judgment in favor of the Board.
The court of appeal affirmed. The court held that: 1975 legislation exempting sales and purchases of master sound tapes (Revenue and Taxation Code section 6362.5) was not made retroactive to periods before 1975 by virtue of 1982 legislation amending Section 6362.5 and declaring the amendment to be declaratory of existing law; agreements between taxpayer and independent production companies were sales contracts and not employment contracts; master tapes were properly taxed as tangible personal property physically useful in the manufacturing process and not furnished as incidents to the services of the recording artists; taxpayer was not denied equal protection on the grounds that leases of motion pictures were exempt from tax while purchases of master sound tapes were taxed; and taxpayer's licenses of duplicate master tapes to other production companies together with the right to reproduce the musical recordings were taxable leases, not payments for intangible rights. Capitol Records, Inc. v. State Board of Equalization (1984) 158 Cal.App.3d 582.