Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 100.0103


100.0103 Signs and Graphics Services. A taxpayer is a graphic design company, with a contract to provide signs and graphic services at a medical center. The taxpayer will provide graphic design (artwork) as well as architectural services. There are four phases to the contract and each phase must be completed and approved by the client before continuing to the next phase. The total fee will vary depending on the time it takes to complete each phase.

Phase I is a review of the client's design themes and to come up with conceptual ideas. Phase II is the "Preliminary Art" stage where sketches and rough design drawings are rendered. No title will pass on any work for Phase I and II.

Phase III will be for finished art. This will include the construction documents that consist of finished artwork and final blueprints. Phase IV will be for quality control supervision to observe the installation of the finished art, including the construction documents. No design or artwork is provided in Phase IV. Another company will provide the final blueprints and install the items at the site.

In Phase I and II, the taxpayer is regarded as preparing preliminary art. Tax will not apply to amounts billed under these two phases if the preliminary artwork is not physically incorporated into the finished artwork.

Phase III requires the taxpayer to provide finished artwork of the designs as well as final design drawings for use in the construction of finished signs. Under this phase, the taxpayer is providing either finished artwork and/or production drawings. As such, sales tax applies to the sale of these items.

A portion of the charges under Phase IV are regarded as attributable to the supervision and review of installation by a third party and are excludable from taxable gross receipts. However, under Phase IV, the taxpayer is also required to review and revise (as necessary) the fabricator's shop drawings. The taxpayer's charges under Phase IV, that relate to or contribute to the design or production of the finished signage, are taxable as part of the cost of producing tangible personal property sold to its clients. (Section 6012(a).) 4/14/95.