Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
432.0000 PRINTED SALES MESSAGES—Regulation 1541.5
432.0072.200 Printed Sales Messages/Printing Aid. A company contracts separately with an advertising agency to do the mechanical through the color separation process and a printer to do the printing, with each company billing separately. Provided the transaction meets all the other requirements of a sale of a "printed sales message," the sale by the advertising agency would not qualify as a sale of printed sales messages. Only the printer's sale of the printed matter could qualify an exempt sale.
An agency purchases for resale photography, art, and other products or services that become a component part of the finished product. It passes title to the company prior to any use by the agency. The agency partially develops the product in one geographical area, ships it to another geographical area, both in California, for completion by another contractor working for the agency. The contractor, in turn, ships the product to an out-of-state printer who prints the insert and ships it directly to a California newspaper for distribution. The customer is billed for the mechanical/color separation separately from the printing. Under these facts, and assuming that the company is contracting only with the advertising agency for the purchase of printed matter, the application of tax to the advertising agency's charge for the photography, art, and other property it purchases for resale depends upon whether the advertising agency makes any use of the property in California prior to shipping it out of state. If the advertising agency produces, or has the subcontractor produce, a color separation in California, the photography and art do not become an ingredient or component part of the color separation. The image embodied in the photograph or art is only reproduced in the color separation and the photograph or art is used as an aid in producing the color separation. Since the advertising agency sells the photograph and art prior to such use, and the sale is in California, sales tax applies to the advertising agency's sale of the printing aids. This is true regardless that the sale of the color separation may be exempt from sales tax as a sale in interstate commerce or that the sale or use of the printed matter may qualify for exemption as a printed message or as a component part of a newspaper. 1/9/89.