Were a copywriter's charges taxable when the writer delivered original text by typed page or computer disk but did no layout, graphics, or finished artwork?

Plain-English summary

An advertising copywriter wrote print ads and brochures, delivered the work in typed form or on computer disk, and left layout and final artwork to a separate graphic designer.

The Board treated the writer as an author performing nontaxable services. Regulation 1501's treatment of an original manuscript applied because the deliverable was original text only; the physical page or disk was the means of conveying the words.

The boundary was explicit. If the copywriter delivered copy that also included graphics or other artwork, the charge was taxable. Sales of reproductions or mere copies of the original work were also taxable. The favorable result assumed the original copy contained no artwork and no reproductions were sold.

What this means for you

Copywriters, creative agencies, publishers, and tax professionals

Define the deliverable precisely. Original text can remain a nontaxable author service even on physical media, but bundled layout, graphics, artwork, finished production, or extra copies can create a taxable transfer.

Common questions

Q: Did delivering text on a computer disk make it taxable?

A: No on these facts. The writer supplied original words only and did not create the final tangible product.

Q: What if the writer also supplied graphics or artwork?

A: The opinion said the charge for that item would be taxable.

Q: Were extra copies of the original work taxable?

A: Yes. Regulation 1501 distinguished the nontaxable original manuscript from sales of mere copies.

Citations and references

• California Revenue and Taxation Code § 6051
• California Sales and Use Tax Regulations 1501, 1540, 1541, and 1543

Source

• Annotated Legal Opinions collection: CDTFA Annotated Legal Opinions
• Annotation page: Annotation 442.1000
• Original supporting opinion: 442.1000 PDF

Original ruling text

442.1000

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

MEMBER
First District

LEGAL DIVISION (MIC:82)
450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-2641

BRAD SHERMAN
Second District, Los Angeles
ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles

January 27, 1994

GRAY DAVIS
Controller, Sacramento
BURTON W. OLIVER
Executive Director

REDACTED TEXT
This is in response to your letter dated January 3, 1994, regarding the application of tax to advertising copy that you provide to your clients. In your letter you state: "I am primarily in the business of writing print ads and brochures for a variety of clients. I submit my work to them in typed form or on computer disc. The clients then turn my work over to a graphic designer, who is responsible for incorporating my written words into the final artwork. I do not do any layout work, nor do I create the finished, tangible product. I simply write the words that are made part of the finished product by someone else." A retailer's gross receipts from the retail sale of tangible personal property in California are subject to sales tax unless the sale is specifically exempt by statute. (Rev. & Tax. Code § 6051.) On the other hand, the charge for providing a service is not subject to sales tax. Regulation 1501 states that, "the transfer to a publisher of an original manuscript by the author thereof for the purpose of publication is not subject to taxation." We consider this conclusion from Regulation 1501 applicable to the circumstances you describe, that is, since you provide words (text only) to your clients to be used by them in certain materials you are considered an author performing nontaxable services. (Regs. 1501, 1543.) Please note, however, if you provide your customers with any copy that also includes graphics or other artwork, your charges for that item would be subject to tax. (Regs. 1540, 1541.) In addition, Regulation 1501 states that “the tax would apply to the sale of mere copies of the author's works or the sale of manuscripts written by other authors where the manuscript itself is of particular value as an item of tangible personal property and the purchaser's primary interest is in the physical property.” Therefore, the sale of copy is taxable to the extent that you sell copies of the original work. Assuming you are not selling reproductions of the original copy and that original copy includes no artwork, you are an author performing nontaxable services.

January 27, 1994

2

442.1000

If you have further questions, feel free to write again.
Sincerely,
Pat Hildebrand
Staff Counsel
PH:cl
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