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its mailing lists during the years in issue. We disagree. In
that letter, petitioner requested list rental rates for July 1988
to June 1989. It does not show that petitioner was renting its
lists during the years in issue.
The taxpayer in Sierra Club, Inc. v. Commissioner, 86 F.3d
1526 (9th Cir. 1996), set the rental rates, rented its mailing
lists, and had the right to review requests to rent the lists and
to approve the proposed mailing material and schedule for each
mailing, but took no other action. The U.S. Court of Appeals for
the Ninth Circuit held that payments for rental of mailing lists
were royalties because the taxpayer did not provide any services
with the mailing lists. Id.
Petitioner's conduct was more like that of the taxpayer in
Sierra Club than that in Disabled Am. Veterans. Like the
taxpayer in Sierra Club, petitioner maintained its mailing lists
to further its tax-exempt function. Sierra Club, Inc. v.
Commissioner, 86 F.3d at 1535. Petitioner employed Carr to
maintain the lists on a computer data base. Like the taxpayer in
Sierra Club, petitioner set rental rates and had the right to
approve mailing material, but unlike the taxpayer in both
Disabled Am. Veterans cases, it did very little else to support
the credit card program. PB&T prepared and mailed all of the
promotional materials.
Respondent points out that petitioner reported the Wayneco
payments from the sale of merchandise, such as watches and rings,
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