Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 295.0545


295.0545 Royalty Fees. A taxpayer publishes magazines which advertise real property for sale by independent brokers or others. The taxpayer grants exclusive franchises in specified geographical areas for the publication and distribution of the magazine. The property advertised in the magazine is limited to the franchise area. The franchisees pay taxpayer a fee, based on the number of pages, to publish the magazines. In addition to this fee, the taxpayer charges franchisees a "royalty fee" based on a "percentage of the suggested retail price for the pages of advertising." The royalty fee is for "intangible rights such as the exclusive territorial rights, logos, trade marks, etc." The "royalty fee" is charged whether or not the taxpayer does the printing.

The "royalty fees" are part of taxable gross receipts when the taxpayer does the printing for the franchisees. Where the franchisees do not purchase printing from the taxpayer, the "royalty fees" are not taxable since there is no sale of tangible personal property. Additionally, if the publication qualifies for tax exemption either as "periodicals" or as "printed sales messages," the "royalty fee" would be nontaxable. 10/26/90.