Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 100.0034.400


100.0034.400 Producing a Print Advertisement. A taxpayer who is a design and marketing company contracts to create and produce an advertisement for print media. The taxpayer's concept of the advertisement is shown to the client in the form of visual presentations. The concept's visual presentations include photographs, illustrations, and written advertising headlines. The visual presentations may be physically mounted on boards or may be in the form of "output from the computer" which includes text and graphics generated by a computer program and printed out in the form of hard copy so that the client can view it. Neither title to, nor possession of, the tangible personal property which is used in preparing or displaying the visual presentations passes to the client.

After the client selects a preferred concept, the taxpayer develops the concept further through a writing and graphic design process. Prior to production, the taxpayer prepares a final mock up for the client's review and approval. After the client's approval, the taxpayer produces, on a computer, camera ready artwork and type which it transmits via a computer disk to be reproduced or duplicated in-house by a photographic process. This photographic reproduction is then shipped by the taxpayer to the publication which will run the advertisement. The publication in which the ad will run is not a printed sales message as defined by Regulation 1541.5. The taxpayer is not acting as an agent on behalf of the client.

When the taxpayer produces a print advertisement for a charge, it is the seller of tangible personal property (such as photographic reproduction of the ad) sold at retail to the client. However, tax would not apply to the taxpayer's separately stated charges for preliminary art, such as the visual presentations and/or mock-up which taxpayer shows to the client to obtain final approval for production of the final ad. Tax does apply to the total amount of the charges to the client for the production of the finished art and photographic reproduction of the ad following client approval of the preliminary art. 11/19/96.