Missouri Department of Revenue
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Missouri Department of Revenue Page 1 of 4 Missouri Department of Revenue Jay Nixon, Governor Alana M. Barragán Scott, Director LR 6974 Taxability of Painted Materials & Promotional Materials November 28, 2011 Dear Applicant: This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10 1.020, in response to your letter dated September 26, 2011. The facts as presented in your letter ruling request and Applicant’s web site are summarized as follows: Applicant is an advertising agency that sells advertising services to clients in Missouri. These services include radio and television media, promotional items, printing, and billboards. Applicant also purchases printed materials to sell to its customers. ISSUE 1: Are Applicant’s purchases of printed materials such as business cards and letterhead subject to sales tax? RESPONSE 1: No. Applicant’s purchases of printed materials such as business cards and letterhead are not subject to sales tax. Section 144.020.1, RSMo, imposes a sales tax “upon all sellers for the privilege of engaging in the business of selling tangible personal property or rendering taxable service at retail in this state.” Section 144.034, RSMo, provides that “[t]he sales of advertising by legal newspapers pursuant to chapter 493, advertising agencies, broadcast stations, and standardized outdoor billboard advertising shall be considered the sale of a service and not the sale of tangible personal property.” Missouri Code of State Regulations 12 CSR 10 103.610(2)(B) defines an advertising agency as “a business, not owned by an advertiser, which is directly responsible to an advertiser for and whose predominant functions as a business are the creation or supervision of the production and placement of advertising and advertising materials in the media.” http://dor.mo.gov/rulings/show.php?num=6974 4/9/2012 Missouri Department of Revenue Page 2 of 4 Missouri Code of State Regulations 12 CSR 10 103.610(1) provides: In general, if a sale of advertising involves the transfer of tangible personal property, it is a sale of tangible personal property subject to tax unless it is preliminary art or the sale is made by an exempt business. If the sale is made by an exempt business, the transaction is the sale of a service and is not subject to tax when the true object of the sale is the advertising. When the true object of a sale by an exempt business is tangible personal property, it is subject to tax. Missouri Code of State Regulations 12 CSR 10 103.610(4)(A) provides, in relevant part, examples of printed materials that are not advertising materials. The following items are generally considered to be tangible personal property, not advertising or promotional items, although they may have promotional value: 1.Specialty advertising; 2.Business cards; 3.Brochures and books not promoting sales of products or services; 4.Annual reports; 5.Informational pamphlets not promoting sales of products or services; 6.Training materials not promoting sales of products or services; 7.Banners (not POS); 8.Posters (not POS); 9.Signs (not POS); 10.Educational films not promoting sales of products or services; 11.Employee benefits material and plan descriptions not promoting sales of products or services; 12.Business signage, logos and stationery designs; 13.Business directories including yellow pages; 14.Warranty books and product instructions not promoting sales of products or services; and 15.Items mass produced or reproduced in quantities in excess of that reasonably anticipated to be necessary for an advertising campaign and sold for purposes other than promoting sales of a particular product or service. Applicant purchases business cards and letterhead for resale to its clients. Under Missouri Code of State Regulations 12 CSR 10 103.610(4)(A), these types of items are tangible personal property even though they may have some promotional value. Therefore, Applicant does not pay sales tax on its purchases of business cards and letterhead. Applicant’s sales of these items to its clients are subject to sales tax. ISSUE 2: Are Applicant’s purchases of promotional materials subject to sales tax? RESPONSE 2: Yes. Applicant’s purchases of promotional materials are subject to sales tax. http://dor.mo.gov/rulings/show.php?num=6974 4/9/2012 Missouri Department of Revenue Page 3 of 4 Missouri Code of State Regulations 12 CSR 10 103.610(4)(B) provides, in relevant part, examples of materials that are advertising materials. The following items are generally considered to be advertising or promotional items: 1. Printed materials promoting sales of products and services, including fliers, handouts, brochures and sales promotion materials; 2.Direct mail and direct marketing materials (not distributed by mail), promoting sales of products and services; 3.POS materials, including displays, banners, posters and table tents and package designs, promoting sales of products and services; 4.Radio commercials, including film and video cassettes and tapes of them; 5.Television commercials, including film and video cassettes and tapes of them; 6.Audio or visual commercials for promotional or merchandising purposes, including audio and visual tapes, cassettes and films of them; 7.Print media advertising, including magazine ads, newspaper ads, periodical ads, trade journal ads, publication ads, book ads, other printed material, ads and newspaper inserts; 8.Billboards, signage, transit advertising (bus, rail, taxi and airport) and shopping mall and sports arena advertising and displays, promoting sales or products or service; 9.Product and service sales materials for dealers, distributors and other sales persons; and 10.Corporate advertising. Unlike the sale of business cards and letterhead, Applicant’s sales of promotional materials are not a sale of tangible personal property, but a sale of a service. Section 144.034, RSMo, provides that “[p]urchases of tangible personal property which are for use in producing advertising by the businesses listed in the preceding sentence shall be deemed to be purchases for use or consumption and not for resale.” Because these purchases are not for resale, the purchases are subject to sales tax. ISSUE 3: Are Applicant’s purchases of printed materials such as business cards and letterhead for sale to a non profit organization subject to sales tax? RESPONSE 3: No. Applicant’s purchases of printed materials such as business cards and letterhead for sale to a non profit organization are not subject to sales tax. Section 144.018.1, RSMo, provides: “[N]otwithstanding any other provision of law to the contrary, except as provided under subsection 2 or 3 of this section, when a purchase of tangible personal property or service subject to tax is made for the purpose of resale, such purchase shall be either exempt or excluded under this chapter if the subsequent sale is: … (4) Subject to tax but exempt under this chapter.” When Applicant purchases printed materials, such as business cards and letterhead for sale at retail, the purchases are exempt from sales tax. See Response 1. However, in this http://dor.mo.gov/rulings/show.php?num=6974 4/9/2012 Missouri Department of Revenue Page 4 of 4 instance, Applicant is selling the printed material to a non profit organization that is exempt from sales tax. Section 144.018, RSMo, applies and Applicant’s purchase of these printed materials is not subject to sales tax. ISSUE 4: Are Applicant’s purchases of promotional materials for sale to a non profit organization subject to sales tax? RESPONSE 4: Yes. Applicant’s purchases of promotional materials for sale to a non profit organization are subject to sales tax. See Response 2. This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals. If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change. For this reason, the interpretation set forth above should be reviewed on a regular basis. Please note that any change in or deviation from the facts as presented will render this ruling inapplicable. Should additional information be needed, please contact Legal Counsel Christopher Fehr, General Counsel’s Office, Post Office Box 475, Jefferson City, Missouri 65105 0475 (phone 573 751 0961), or me. Sincerely, Alana M. Barragán Scott http://dor.mo.gov/rulings/show.php?num=6974 4/9/2012
