Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 100.0036


100.0036 Sales of Layouts. An advertising agency has entered into contracts with its clients. The contracts contain different clauses pertaining to terms of payments and termination. These clauses have a direct effect on whether there are sales of layouts to customers. The contracts fall into three groups:

(1) Clauses in these contracts state that upon termination, all property and materials in possession of the agency and paid for by the client will be transferred to the client. All rejected or unused advertising plans and ideas will remain the property of the agency.

Under contracts which contain clauses with this language, it is clear that title passes to the customer on all approved layouts and all rejected or unused plans remain the agency's property. Also, there are provisions in these contracts which state that once the property is approved and paid for the property belongs to the client. Accordingly, even though there was no transfer of possession, there was transfer of title and a sale occurs at the time of payment.

(2) Clauses in these contracts state that all work done by the agency for the client shall become the exclusive property of the client upon payment therefor. Following termination of agreement, the agency shall transfer to the client all material, etc., subject only to the client's payment to the agency therefor.

Under these types of contracts, the client has the right to all work done by the agency upon payment of the agreed upon price. All work includes preliminary layouts and thus, tax applies to charges made for layouts at the time of payment.

(3) Clauses in these contracts state that all plans for advertising, layouts, etc., shall become, from time of approval, the client's exclusive property. Title shall be contingent upon full payment by the client within the time provided in the agreement. Upon termination, the agency agrees to transfer and make available all property and materials in the agency's possession.

Under this type of contract, a sale has taken place on layouts that are approved and paid for. If the termination of the contract occurs before a layout is approved and paid for, the sale occurs on the termination date. 7/8/81.