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
100.0197 Transfer of Artwork on Disc. Computer generated preliminary art may be nontaxable if, for example, an artist created five different concepts on a disc and presented the designs to a client for approval. The client chooses one design and the artist recreates the design on another disc. If the artist follows the procedures in Regulation 1540(a)(11), the artist may consider the charge for preliminary art to be nontaxable. The artist must retain the medium containing the design as well as records to prove the client ordered, or the artist produced the preliminary art prior to the date of the contract on approval for the finished art.
The transfer of artwork on a disc is not considered to be a transfer of a custom program. The transfer of the output is subject to tax. Tax applies to the entire charge for the artwork, including any portion of the charge attributable to programming by the retailer for their use in producing the artwork. 3/17/92. (Am. 2005–2).