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
100.0118 Computer Created Graphic Design. A taxpayer, a graphic designer, gives her client an estimate for the job, including her charge for all the time and material she needs to complete the ad layout. When the client approves the estimate, she prepares sketches, but does not show the sketches to the client; rather, she selects which sketches she will use to proceed to the next step. On her computer, she creates a page design that incorporates her ideas into two or three layouts. She laser prints the two or three layouts to present to the client. The client suggests changes which she incorporates. She then works on the original idea page to create the next step in the process, art which is presented to the client who may make additional changes. After making the changes, taxpayer prepares the final art and provides it to the client on a disk.
When the taxpayer provides the final art to the client in the form of tangible personal property in this state, whether the final art is on paper or computer disk, the charge is subject to sales tax. However, the taxpayer may exclude from the measure of tax separately stated charges for preliminary art even when it is prepared on a computer. The taxpayer's nontaxable preliminary art charges might include charges for the sketches, the meetings attended prior to obtaining approval to proceed to finished art, the time spent on the photo shoot, and research time. Hard copy of each of the roughs, visualizations, layouts, or comprehensives presented for client's approval should be retained for audit purposes. 6/3/97.