Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
100.0000 ADVERTISING AGENCIES, COMMERCIAL ARTISTS AND DESIGNERS—Regulation 1540
(c) PRELIMINARY AND FINISHED ART
Reproduction proofs, see Printing and Related Arts.
100.0104.800 Art Used in Packaging Containers. A company, selling computer based training materials on diskettes, contracted with a designer to create a new design for the cover of the packages in which the diskette and manuals are sold. This design was used to create camera-ready art which was photographed. The printing plates used to print the packaging were created from the negative film. The company maintains that the art design cost is part of the packaging cost of the product sold and thus should be exempt from sales tax.
The fact that the art purchased was not camera ready art does not affect the taxability of the sale. The preliminary art exclusion from sales and use tax is not applicable here because the artwork was sold to the company pursuant to the contract to deliver art work. Presumably title passed to the company upon sale, after which the company made use of the design to produce its packaging. The exemption for sales of containers also is inapplicable to this case. The design purchased by the company is not a container or a component part of a container, but rather is used in fabricating the container. 10/24/89.