Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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557.0000 TRANSPORTATION CHARGES—Regulation 1628

Annotation 557.0400

557.0400 Newspaper Delivery Charges. A newspaper publisher ships the newspapers with its own facilities from the plant where they are manufactured to locations where the newspapers are received by independent contractors, not employees of the publisher, who use their own resources, not facilities of the publisher, to transport the newspapers directly to residences of individual subscribers. Subscribers are presented with the following renewal notices or invoice: "Name of newspaper, daily and Sunday, $x.xx (per month)." "Includes applicable sales tax computed to the nearest mill. $x.xx of your monthly charges is attributable to transportation." The amounts attributable to transportation are based on the actual transportation fees paid by the publisher to the independent contractors who deliver the newspapers to the subscribers. Since the actual cost of transporting the newspapers varies among each distinct service area, the publisher separately states a charge to all its customers in a particular geographic area equal to the lowest cost of transportation to any of its customers in that area or route.

Since the publisher is selling the newspapers for an agreed price regardless of the amount of the sales price that is allocated to the delivery of the newspaper, and since the publisher does not alter the subscription price of its newspapers to its customers based on the charges that it incurs for delivery, the publisher is regarded as selling its newspapers at a "delivered price." A separately stated charge for transportation is not subject to tax provided:

1. Title to the newspaper passes to the customer prior to the delivery for which the charge is made, e.g., when the independent carrier receives the newspaper for delivery to the customer.

2. The charge is calculated based on the actual costs incurred by the publisher for delivery by the independent carrier rather than on an average monthly basis. For example, the publisher cannot designate a monthly amount for transportation charges on its invoices based on an average of 4.3 weeks per month because the net result would be that some monthly charges are either less than, or in excess of, the actual charges for that particular month (i.e., when the month in question is not 4.3 weeks long). Instead, the billing must be based on the actual cost for that month. If the publisher wishes to use the same figure for each billing cycle, the cycle must be of the same length (e.g., 4.3 weeks) so that the actual cost is the same each billing cycle.

3. The charge does not exceed the actual cost to the publisher of transportation by independent carrier to that customer. Since the publisher wishes to make an identical transportation charge for each customer, that charge cannot exceed the lowest actual cost of transportation to any customer. 11/16/99. (2000-3).