Information Release

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ST 1996-02 - Certain Printed Materials - November, 1996

Persons engaged in publishing/printing, particularly of advertising materials, are advised to consider updating their sales and use tax compliance procedures to reflect recently passed legislation. S.B. 266, which became effective November 20, 1996, changes the tax consequence of transactions between publisher/printers and their advertising clients when the printed matter is distributed free of charge to third party recipients. The law changes the Department of Taxation's prior position that certain advertising material was "sold" to advertisers, an interpretation which was based on several years of consistent court rulings. Instead of viewing such transactions as sales, the new law focuses on the consumption of the printed matter by publisher/printers. A description of the advertising transactions and the Department's guidance on them are offered below.


A typical affected situation involves a publisher/printer, its advertising clients, advertising material, and the free receipt of the material by households and others. The publisher/printer solicits clients to place advertisements in a printed medium for a charge. The publisher arranges for a printer to produce the material or, in the case of a publisher/printer, does the printing itself. The publisher/printer then distributes or otherwise gives away the printed material to individuals or households targeted by the publisher and/or advertiser. Examples of advertising which is printed and distributed in this manner are:

  • flyers distributed door-to-door;
  • flyers and other inserts distributed with newspapers;
  • advertising material delivered by direct mail;
  • advertising and entertainment publications, which are not "community newspapers" as defined in Rule 5703-9-28 of the Ohio Administrative Code, that are normally distributed at various locations within a community; and
  • telephone yellow pages.

Tax Ramification and Law

S.B. 266 establishes that publisher/printers of materials like those listed in the previous paragraph are performing an (nontaxable) advertising service for their customers; further, the publisher/printers are the consumers of all materials and services purchased in providing this service. The Department interprets this law as applying to situations where the publisher/printer produces individual items, multi-page matter, or packets that contain the advertising of more than one advertiser.

As noted, S.B. 266 essentially replaces the previous reasoning enunciated in court cases, which held that such transactions were sales of tangible personal property by the publisher/printers to their advertiser customers. The consideration (or price) for these "sales" was deemed to be the charge associated with placing advertising space in the printed matter.

The act makes these changes by amending Section 5739.01 (D) to include certain types of taxpayers within the meaning of "Consumer" in new paragraphs (4)(a) and (b), and by specifying the nature of such a transaction in paragraph (c). Section 5739.01(D)(4) reads:

"(a) In the case of a person who purchases printed matter for the purpose of distributing it or having it distributed to the public or to a designated segment of the public, free of charge, that person is the consumer of that printed matter, and the purchase of that printed matter is a sale.

(b) In the case of a person who produces, rather than purchases, printed matter for the purpose of distributing it or having it distributed to the public or to a designated segment of the public, free of charge, that person is the consumer of all tangible personal property and services purchased for use or consumption in the production of that printed matter. That person is not entitled to claim exception under division (E)(8) of this section for any material incorporated into the printed matter or any equipment, supplies, or services primarily used to produce the printed matter.

(c) The distribution of printed matter to the public or to a designated segment of the public, free of charge, is not a sale to the members of the public to whom the printed matter is distributed or to any persons who purchase space in the printed matter for advertising or other purposes."

Compliance Measures

Since the placement of multi-client printed advertisements on printed matter, as explained above, is no longer considered the sale of tangible personal property, publisher/printers can no longer claim sales tax exceptions based on making such sales. That is, publishers can no longer claim the resale exception [Section 5739.01(E)(1) O.R.C.] when arranging for a printer to produce the advertising material, and publisher/printers can no longer claim the printing exception [Section 5739.01(E)(8) O.R.C.] when they print the advertising materials themselves.

Publishers should pay the sales tax on the purchase price of the printed material or the publisher/printers should pay tax on the materials, supplies, and any taxable services consumed in the production of the printed material. Publisher/printers should pay the tax to the Ohio vendors or registered out-of-state sellers who produce the printed matter or supply the taxable materials, supplies, or services. If tax is not paid to a vendor or seller, the publisher/printer should accrue it and pay tax on a consumer's use tax account.

Publishers who purchase multi-client advertising material are consumers of that matter. Accordingly, they are to pay tax on the purchase of such material. Printers who produce the material for publishers may continue to claim "to use or consume the thing transferred in the production and preparation in suitable condition for market and sale of printed, imprinted, overprinted, lithographic, multilithic, blueprinted, photostatic, or other productions, or reproductions of written or graphic matter" [Section 5739.01(E)(8) O.R.C.] on exemption certificates furnished to suppliers.

Publisher/printers who print matter (such as brochures, annual reports, single-client advertising material, etc.) for sale to customers are responsible for collecting sales tax on those transactions. Publisher/ printers are entitled to the same exception described in the previous paragraph when purchasing material and equipment for this purpose. However, when material and equipment is consumed for printing multi-client advertising material, publisher/printers are consuming the material and equipment in a taxable manner. They owe tax on any portion of their purchases consumed for this purpose. Equipment primarily used to print matter for sale qualifies for exception, while equipment primarily used to print matter for consumption now is taxable.

Vendors who sell tangible personal property or provide taxable services to publishers or printers are encouraged to consult with all customers whose tax status may have been changed by this law. Confirmation of the continuing validity of any claim of exemption reduces the risk of an unexpected tax liability should noncompliance be discovered.

Additional Sales Tax Effects of S.B. 266

The law was also amended to include a definition for the term "newspaper" and provides a new exception for those engaged in printing a newspaper. Section 5739.01(SS) O.R.C. defines a newspaper as being "an unbound publication bearing a title or name that is regularly published, at least as frequently as bi-weekly, and distributed from a fixed place of business to the public in a specific geographic area, and that contains a substantial amount of news matter of international, national, or local events of interest to the general public." The exception in Section 5739.01(E)(14) O.R.C. reads "to use or consume the thing transferred in the production of a newspaper for distribution to the public." Readers should note that wording of this section allows exception whether a newspaper is sold by subscription or at a per copy price or is distributed without charge to the recipient.

Ten examples are provided to illustrate the Department's position on the tax consequences of various advertising-related transactions involving printed materials.


Example #1: Company A arranges for the printing of a "magazine-like" publication containing advertisements of vendors of tangible property as well as a variety of service providers, including real estate companies, insurance agents, beauty and barber salons, home maintenance contractors, lawn care providers, and medical, dental and veterinarian practitioners. The printed matter is distributed free to households by direct mail, is included with other advertising matter which is hung on door knobs or mailboxes by a distribution company, or is put in free access street corner boxes.

Tax Treatment: Company A is the consumer of the magazine under Section 5739.01(D)(4)(a) or (b) O.R.C. If it prints the magazine itself, it owes tax on the paper, ink, and other supplies it consumes. Any equipment used primarily to produce the magazine would also be taxable because the equipment is not primarily used to print items for sale. If a printer supplies the printed material to Company A or to a distribution company, Company A should pay tax on the price of the printed matter. Company A's charges to the persons placing advertisements in the magazine are not taxable.

Example #2: Company B operates similarly to Company A except that it periodically produces photo advertisement and other newsprint-type publications in which businesses and individuals advertise cars and trucks for sale. Company B charges for placing the ads. The publications are sold to vendors who sell them at retail on a per copy basis.

Tax Treatment: Company B is not affected by S.B. 266. It remains a printer of tangible personal property for sale. If B produces the publication itself, it is entitled to claim exception on its purchases that are consumed in printing under Section 5739.01(E)(8) O.R.C. If a printer produces them for B, B could purchase the publications without payment of tax based on the resale exception [Section 5739.01 (E)(1) O.R.C.]. B's charges to those placing advertisements are not taxable. B's sales of the publications to vendors are not taxable, but B should obtain exemption certificates from the vendors to confirm their entitlement to the resale exception. The vendors should charge tax on sales of the publications.

Example #3: Company C also operates similarly to Company A except that it uses a different kind of printing to convey its clients' advertising messages. Instead of a "magazine" of coupons or ads, it distributes envelope-size packets containing material produced for several advertisers that are delivered by mail to residents in pre-selected zip codes.

Tax Treatment: Like Company A in Example #1, Company C would owe tax on any material purchases if it produced the matter itself, or on the charge for having the matter produced if another company was hired to print it. Any charge to C for postage or to deliver the material to a post office is not taxable. C's charges to the advertisers for placing the advertisements are not taxable.

Example #4: Company D owns retail stores and arranges (or works through its advertising agency) to have a publisher/printer produce and distribute advertising flyers. The flyers are sent to area newspapers, to the same door-to-door deliverer in Example #1, and to D's own stores for distribution to walk-in customers .

Tax Treatment: Company D is the consumer of all the printed matter. If the flyers do not "price and describe" tangible personal property D sells at retail, D would owe tax on the purchase of the flyers. If the flyers do "price and describe" property D sells at retail, D may claim exemption on its purchases from the publisher/printer under Section 5739.02 (B)(37)(a) O.R.C.

Example #5: Company E sells (or contracts with others to sell) advertising space in "books" made available without charge to telephone service subscribers. E then prints the books or causes them to be printed and has them delivered to residences and businesses in a prescribed telephone service area.

Tax Treatment: Company E is the consumer of the books and owes tax on the materials it uses to print them, or on their purchase price if bought from a printer/publisher. E's charge to its advertising clients for space in the books is not taxable.

Example #6: Company F arranges with several advertisers to place their advertising messages and coupons on the back side of blank cash register tape rolls. F pays a printer to print its clients' advertisements and coupons on the tapes and then provides the tapes without charge to retailers who use them to produce cash register receipts.

Tax Treatment: Company F is the consumer of the printed register tape rolls. F has no exemption for the purchase of the rolls or the printing charges. F's charges to the advertisers are not taxable.

Example #7: Company G, a large retailer, and Company H, a service provider, separately contract with a printing company to produce multi-page or single page advertising inserts for distribution with a newspaper.

Tax Treatment: Both Company G and Company H are the consumers of the advertising inserts. G may claim exemption from tax on its purchases from the printing company provided the inserts price and describe tangible personal property offered for retail sale. (Refer also to Example #4.) Company H does not sell tangible personal property and is not entitled to exemption; therefore, H should pay tax to the printing company on the charge for the printed material.

Example #8: Company I is a manufacturer of household products which engages a company to print coupon inserts and furnish them to selected newspaper publishers for distribution with their Sunday editions.

Tax Treatment: Company I is the consumer of all advertising inserts that are delivered into Ohio. Since it is a manufacturer, I does not qualify for the exemption for advertisements that "price and describe" tangible personal property offered for retail sale. I must pay tax at the proper state and local tax rate(s) in effect where the material is delivered.

Example #9: Company J prints (or causes to have printed) newspaper inserts consisting of advertisements by manufacturers, retailers, direct marketers, and others who advertise nationally. The inserts are provided to large newspaper publishers throughout the country and distributed with the newspapers on predetermined dates.

Tax Treatment: Company J is the consumer of the inserts, whether it buys them or prints them. The Ohio consumption of materials (and any equipment used primarily for this purpose) is subject to tax. J's charge to its advertising clients is not subject to tax.

Example #10: Company K distributes printed material received from clients who desire to have them included with other advertising matter that K hangs on door knobs or mailbox posts. K stuffs, or has outside contractees stuff, plastic "hanger" bags which K purchases. Clients' advertisements are printed on one side of the plastic hanger bag, and one of K's own advertisements is on the other.

Tax Treatment: Company K is the taxable consumer of the bags and the printing put on them, as well as any other material K purchases to perform the service. Its per item or other charge to the bag advertiser and to the companies that provide the printed material is not taxable.

Additional Information

Rate of Taxation

Ohio vendors collect tax based on their location. Delivery vendors and out-of-state sellers collect tax based on the county where the advertising material is delivered. If a purchaser consumes taxable item(s) in a county with a higher sales and use tax rate than the county rate used to charge tax, the consumer owes additional use tax. The amount of additional use tax due (payable on a consumer's use tax return) would be based on the difference in rates between the two counties.


If separately itemized, a delivery charge is not part of the price upon which tax is based. However, failure to have separately stated any otherwise nontaxable charge results in the tax being applied to the entire amount charged, including any delivery/shipping. Section 5739.01(H) O.R.C.


Persons engaged in transactions where printed matter is distributed free of charge to the public or designated portions thereof are advised to analyze the language of S.B. 266 in light of the text and examples in this release and adjust their sales and use tax compliance where necessary.

If you have any questions regarding this matter, you should call us at 1-888-405-4039.

Phone: 1-800-750-0750