Tax Rules: Final: 5703-9
5703-9-41 Person engaged in advertising
field
A person engaged in the field of advertising or in the
preparation of advertising matter who sells tangible personal
property obtained from others or who produces tangible
personal property for transfer to another for a consideration
is a vendor with respect to such transactions. If the sales
are retail sales the vendor must hold a vendor's license,
collect the sales tax, file returns and remit the tax.
The production of tangible personal property for the
advertiser is a sale irrespective of whether the material
used in the production is supplied either directly or
indirectly by the advertiser or is obtained by the producer
on his own behalf. The production of items such as
photographs, photostats, art work, plates, mats, printed
material, etc., for another for a consideration is a sale of
such items.
The full amount charged on the sale or production of tangible
personal property is subject to the sales tax even though a
part of the charge may be billed as "service charge", "fee",
or "commission". Where preliminary art has been prepared, the
price or tax base for the finished art work includes the
amount attributable to the preliminary art.
A person purchasing tangible personal property from others
for the purpose of resale or for the purpose of incorporating
it into tangible personal property produced for sale may
purchase such property exempt from the sales or use tax.
Exemption may also be claimed on the purchase or use of
tangible personal property used directly in producing the
property for sale.
A person in the advertising field who does not sell or
produce tangible personal property, but who is engaged solely
in rendering service to others as a true agent, is not
considered to be a vendor with respect to such services. In
determining whether such a person is acting as a true agent,
consideration should be given to the contract between the
parties, the conduct of the parties with respect to the
property involved, and the facts and circumstances of the
transaction. A person who, for example, operates under an
agreement wherein the agency relationship is specifically set
forth and under which advertising is placed in selected media
or tangible personal property is purchased on behalf of, and
in the name of, the principal, would be considered a true
agent. An agent purchasing for another must either pay the
sales tax or furnish a properly executed exemption
certificate in the name of, and on behalf of, the principal.
In claiming exemption based upon the use of the thing
transferred the purpose of the principal, not the agent, is
the determining factor.
Transactions not involving the sale of tangible personal
property or the production of tangible personal property are
considered to be the performance of a service. Examples of
such services are:
Recommendations for advertising themes or for merchandising
plans;
The placing of advertising matter in or the purchase of space
or time from advertising media;
The writing of original manuscripts, news releases, copy for
use by newspapers or other publications or for broadcast on
television or radio;
The purchase of tangible personal property as an agent of the
advertiser; or
The preparation of preliminary art (roughs, visualizations,
thumbnails) solely for the purpose of displaying the
advertising idea to the advertiser.
Where an advertiser is billed for a fee which represents a
charge for service not subject to the sales tax, as
distinguished from services which are a part of a retail sale
or services in the production of tangible personal property,
such billing must clearly show the nature of the service
rendered.
A person engaged solely in the performance of services is the
consumer of the tangible personal property used by him in
performing such service and the tax is applicable to these
purchases.
Effective: 12-21-65 as TX-15-29
Promulgated under: 5703.14