Was a graphic artist's on-site labor to paste up a customer's catalog into camera-ready form taxable?

Plain-English summary

A self-employed graphic artist went to a customer's office and pasted up type for a catalog, turning it into camera-ready property. She did not design the catalog, and the work was not part of a larger project she created.

Tax counsel confirmed that the charge was taxable. Regulation 1526 applied tax to producing or fabricating tangible personal property for a consumer that furnished the materials.

Working on the customer's premises did not convert the transaction into a nontaxable service. The artist's paste-up labor physically produced the camera-ready catalog.

The legal obligation for sales tax rested on the artist as retailer. Whether the customer had to reimburse her depended on their agreement.

What this means for you

Freelance graphic artists

On-site work can still be taxable fabrication. Focus on whether your labor creates or changes tangible property for the customer.

Publishers and catalog businesses

Supplying the materials and workspace does not make the contractor's fabrication labor nontaxable.

Accountants and tax professionals

Separate liability from reimbursement. The retailer owed the tax, while collection from the customer was contractual.

Common questions

Q: Did it matter that the artist worked at the customer's office?

A: No. The work remained taxable fabrication labor.

Q: Did it matter that she did not design the catalog?

A: No. Her paste-up work produced the camera-ready property.

Q: Were customer-furnished materials an exemption?

A: No. Regulation 1526 specifically covered fabrication for consumers that furnished materials.

Q: Who legally owed the sales tax?

A: The artist as retailer; customer reimbursement depended on the contract.

Citations and references

• California Revenue and Taxation Code § 6051
• California Civil Code § 1656.1
• California Sales and Use Tax Regulation 1526

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 100.0034.275
• Original supporting opinion: 100.0034.275 PDF

Original ruling text

100.0034.275

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
PO BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001
TELEPHONE (916) 445-6450

September 26, 1990

Ms. M--- G--XXX --- ----- ---, CA XXXXX

Re:

Graphic Arts – Fabrication Labor
SR -- XX-XXXXXX

Dear Ms. G---:
I am writing in response to your August 8, 1990 letter concerning the application of California sales tax to graphic arts services you provided to a customer. You are a self-employed graphic artist, and your work includes illustration, advertisement and brochure design, and paste-up and mechanical board work for camera-ready art. In 1989, you were hired by a customer to paste up type for a catalog. You completed the work in the customer’s office. You did not design the catalog, but only did the paste-up work and prepared a camera-ready catalog. The work you performed was not part of a larger project that you created. Representatives of the State Board of Equalization’s San Francisco office advised you that your charges to the customer were taxable. However, your customer disputes this conclusion and believes that the work was not taxable. You have requested an answer in writing to confirm your understanding that the charges were taxable. California Sales and Use Tax Law imposes a sales tax on retailers for the privilege of selling tangible personal property at retail. (Rev. & Tax. Code § 6051.) Although, the legal obligation to pay sales tax is on the retailer, Civil Code Section 1656.1 provides that the retailer may seek sales tax reimbursement from the purchaser. It is presumed that all of a retailer’s gross receipts are taxable retail sales until the contrary is established.

Ms. M--- G---

-2-

September 26, 1990
100.0034.275

Board Sales and Use Tax Regulation 1526 states that sales tax applies to charges for producing or fabricating tangible personal property for consumers who furnish the materials used in the producing or fabricating. Thus, when you paste up a catalog for a customer, the charge for your fabrication labor in making the catalog camera-ready is taxable. I have enclosed a copy of Regulation 1526, as well as the Board publication “Tax Tips: the Graphic Arts Industry,” which describes the application of sales tax to the graphic arts industry. You state in your August 8 letter that your customer does not believe the charges for preparing the catalog were taxable. As noted above, although the legal obligation to pay the sales tax is on the retailer, the retailer may seek reimbursement from the purchaser. However, whether your customer, as purchaser of your fabrication labor, will reimburse you for the sales tax due depends entirely on the terms of your agreement. If I can be of any further assistance, please contact me. Very truly yours,

Janet Vining
Tax Counsel
JV:wk
2484C
Enclosure