Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2017
Sales and Use Tax Annotations
100.0000 ADVERTISING AGENCIES, COMMERCIAL ARTISTS AND DESIGNERS—Regulation 1540
(a) IN GENERAL
100.0034.200 Outdoor Displays and Projected Images. A taxpayer is in the business of producing outdoor displays featuring graphics which combine traditional printed outdoor displays and projected images. The images are projected using techniques that include stills, slides, motion pictures, interactive computer projections and light shows. The graphics may be projected onto billboards or onto architectural surfaces, such as buildings, walls, bridges, etc. The taxpayer creates and produces the graphics and may arrange for the lease of the equipment needed for the displays.
The tax consequences of the different circumstances involved in outdoor events are as follows:
(1) Programmed lighting. This is the use of automated stage lighting to produce theatrical effects. Custom computer program may be used to vary the direction, intensity, and sequence of the lights used. Some projections may include a projected logo or other graphic images. "Gobos" may be inserted into light sources to project desired images. A gobo is defined as a glass or metal stencil made by lasers and created from artwork (e.g., logo sheets). Computer programs control the light source so that the projected images can appear to move and change.
If the computer program to control the light show qualifies as a custom program under Regulation 1502(f)(2), the charges for its sale or lease are not taxable.
With respect to the gobos projection method, the taxpayer produces finished art for the client, such as a logo or other graphic image, but a third party makes the gobo, using the finished art. Tax applies to the taxpayer's charges to its client for finished art produced by the taxpayer. (Regulation 1540(b)(4)(B).) If the gobos, special printing aids, or manufacturing aids are acquired from third parties by the taxpayer as its client's agent within the meaning of Regulation 1540(a)(2)(A), the third person supplier is the retailer of the property to the taxpayer's client and the taxable transaction is that sale.
Also, the taxpayer may act as an agent on behalf of its client in dealing with third persons in acquiring for sale or lease of any equipment, such as lights, trucks, generators, electronic equipment, etc., needed for the light show.
(2) Projected still images. Still images may be projected by a slide projector, a motion picture projector, or a computer projector.
If the taxpayer acts as a seller or produces the finished slide films in-house, the taxpayer is the photographer and sales tax applies to the sales price of the slides to the client. The sales price does not include expenses which are not a part of the gross receipts from the sale of the slides. Since the lease of the projection equipment, generators, and other tangible personal property needed to set up and project the slides is unrelated to the production of the slides sold, these charges are excluded from the gross receipts from the sale of the slides unless the lease is required as condition of the contract of sale of the slides.
If the taxpayer acquires the finished slides from an outside photographer and acts as its client's agent, tax applies as stated in item (1) above. The reimbursement for property acquired as an agent for the client should be separately invoiced or shown separately on an invoice to the client. (Regulation 1540(a)(2)(A).)
(3) Printed image with projection motion. This display divides an outdoor display into two sections. Fifty percent of the display is a printed image, e.g., printed onto a billboard. Fifty percent of the display is a projected motion picture, e.g., projected onto the same billboard.
In this situation, the printed image portion of the display is treated separately from the projected motion portion. Regulation 1540 governs the application of tax to the printed image portion. The application of tax to the projected motion portion of the display is governed by Regulation 1529. If the projected motion meets the definition of "qualified motion picture" in Regulation 1529(b)(1), the charge for the projected motion would not be taxable. However, charges for release prints are taxable when sold to a person for exhibition or broadcast.
(4) Projected still images with printed motion. This is an outdoor display that splits the display into two sections. Fifty percent is motion picture, while fifty percent is a projected still image.
The application of tax to slide projection is covered under item (2) above. However, if the stills are projected by means of a motion picture projector, e.g., continuous loops of motion picture film or tape, the stills would then be considered the same as a motion picture and Regulation 1529 would govern the application of the tax.
(5) Interactive Motion. This method uses a computer and projection equipment to project live computer output onto an outdoor display.
See response to item (1) above with respect to custom computer programs and the sale or lease of computers, projectors, and other equipment needed for the display. 12/18/95.