Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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Annotation 330.2770


330.2770 Royalties. An artist receives royalties from companies which use her designs on posters, tee shirts, and other products but she retains the copyright to the designs. The designs are transferred to the companies either as an original artwork or as a slide. The original artwork is sent to the company which photographs it and returns the artwork to the artist. The company will later create a transparency from the slide it created. Slides are sent to the company which creates transparencies directly from the slides and then returns the slides directly to the artist.

The transfer of possession of tangible personal property, the slides and the original artwork, which is then returned to its owner, constitutes a lease of the property. A lease of original artwork is not a lease of property in substantially the same form as acquired by the lessor. The transfer of the original artwork is a taxable lease with the royalties received being the measure of tax. Assuming the artist paid sales tax reimbursement that was due on the purchase of the film processing which produced the slides, the transfer of the slides would not be a taxable transaction. In such case, the temporary transfer of the slides to the companies constitutes a lease of property in substantially the same form as acquired by the lessor. 6/2/89.