Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2017
Sales and Use Tax Annotations
100.0000 ADVERTISING AGENCIES, COMMERCIAL ARTISTS AND DESIGNERS—Regulation 1540
(c) PRELIMINARY AND FINISHED ART
100.0113 Charges for Ad-Prep. An advertising agency contracts to provide advertising services consisting of placement of advertising in printed media. The agency does not have an agreement with its customers authorizing the agency to purchase property as an agent on behalf of the customer.
In providing its services, the agency purchases photographs, artwork, art supplies, copywriting, typesetting supplies, and other items used to produce mechanical paste-ups. Photostats of the mechanicals are furnished to the print media. When the mechanical is of no further use, it is delivered to the client or destroyed.
The client is billed separately for placing the ad and an "ad prep" charge representing the cost of preparing the ad material (materials, outside labor and fabrication labor).
If the ad agency merely prepares and delivers the mechanical to the media on the agency's own behalf, tax would not apply to the charge for the mechanical. The ad agency would be the consumer of tangible personal property used in preparing the mechanical. However, when the mechanical is delivered to the client or title to the mechanical passes to the client, the ad agency is the retailer and tax applies whether the charge is separately stated or not. 6/20/86.