Does a free bi-weekly arts-and-entertainment magazine qualify as an exempt 'periodical,' and are the typesetting/layout charges for its pre-press camera-ready mechanicals taxable?

Subject

, are: (1) whether its publication qualifies as a periodical for sales tax purposes, and (2) whether charges for typesetting and layout on Petitioner's pre-press camera ready mechanicals constitute charges for tangible personal property.

What this means for you

A free bi-weekly arts-and-entertainment magazine, distributed at 500+ locations (and also available by subscription), asked two related questions.

Periodical status: New York exempts newspapers and periodicals from sales tax, but a publication must meet five requirements to qualify: published at least four times a year, never constituting a book, available for public circulation, continuity of title/general content from issue to issue, and containing a variety of articles by different authors on topics like arts, news, or a special field. The magazine here -- with staff writers, columnists, and freelance contributors covering local arts and entertainment -- met all five, so it qualified as an exempt periodical.

Pre-press mechanicals: Separately, the magazine subcontracted typesetting and page layout to a graphics firm operating under its direct supervision, producing camera-ready mechanicals used solely to make printing plates. Mechanicals and art work used to produce newspapers/periodicals for sale normally qualify as exempt production equipment. But here's the catch: because Freetime Magazine is given away, not sold, the underlying legal requirement that the end product be produced "for sale" isn't met. So even though the mechanicals are otherwise the exact kind of item that would be exempt production equipment for a periodical sold at retail, this magazine's purchases of typesetting and mechanicals were fully taxable tangible personal property.

Q&A

Q: We publish a free give-away magazine -- does it still qualify as an exempt "periodical"?
A: The periodical exemption itself (Tax Law § 1115(a)(5)) doesn't require the publication to be sold -- it just has to meet the five structural criteria (frequency, not a book, public circulation, continuity, variety of articles). A free magazine meeting those criteria still qualifies as an exempt periodical.

Q: If our periodical is exempt, are our prepress/typesetting costs also automatically exempt?
A: No -- that's a separate exemption (the production-equipment exemption under § 1115(a)(12)), and it specifically requires the equipment/materials to be used to produce tangible personal property for sale. If your periodical is given away rather than sold, your prepress mechanicals and typesetting charges don't qualify for that exemption and are taxable, even though the periodical itself escapes tax.

Q: Does the fact that our own subcontractor works under our direct supervision change the tax result?
A: No -- the taxability turns on whether the finished product (the magazine) is sold or given away, not on the supervision arrangement with the typesetting subcontractor.

Citations

• Tax Law § 1115(a)(5) -- exempts newspapers and periodicals from sales tax.
• Tax Law § 1115(a)(12) -- exempts machinery/equipment used directly and predominantly to produce tangible personal property for sale.
• Tax Law § 1105(a) -- imposes sales tax on retail sales of tangible personal property.
• Tax Law § 1101(b)(6) -- defines tangible personal property.
• 20 NYCRR 528.6(c)(1) -- sets the five-part test for a publication to qualify as an exempt periodical.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1995.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a95_21s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-95 (21)S
Sales Tax
June 21, 1995

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S950125B

On January 25, 1995, a Petition for Advisory Opinion was received from Freetime Magazine
Inc., 850 University Ave., Rochester, New York 14607.
The issues raised by Petitioner, Freetime Magazine Inc., are: (1) whether its publication
qualifies as a periodical for sales tax purposes, and (2) whether charges for typesetting and layout
on Petitioner's pre-press camera ready mechanicals constitute charges for tangible personal property.
Freetime Magazine is a bi-weekly publication which is published every other Wednesday.
Freetime Magazine never constitutes a book in either single or successive issues.
Every issue of Freetime Magazine is distributed to the general public at more than 500 places
of public accommodation and retail outlets in the western New York area. It is also available by
subscription.
Every issue of Freetime Magazine contains news and information gathered from press
releases, public notices, and its own sources, of general interest with particular emphasis on area arts
and entertainment. Current events in the arts and entertainment realm are reported in great detail and
columnists regularly review, preview, and comment on events, music, film, theater, sports, dance,
dining, the arts, etc.
Freetime Magazine uses an original copyrighted format, and every issue contains information
and articles about Western New York's Arts and Entertainment Scene.
Freetime Magazine is written and edited by members of its staff as well as several regular
columnists and various free lance contributors.
Petitioner subcontracts its typesetting and page layout to Blue Heron Graphics, a private
business located in the same premises as Freetime Magazine.
All work performed by Blue Heron for Petitioner is performed to the exact specifications,
and under the direct supervision of Petitioner.
All art work, photographs, mechanicals, text, and layouts used in the production of Freetime
Magazine are the property of Petitioner at all times.

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TSB-A-95 (21)S
Sales Tax
June 21, 1995
Charges for services performed by Blue Heron Graphics on behalf of Petitioner are for labor,
skill, and graphic design. These charges are measured on a per page basis. Actual materials used
in the production of the "camera-ready" pre-press mechanicals provided by Blue Heron to Petitioner
are insignificant in cost.
These mechanicals provided to Petitioner by Blue Heron Graphics are made to the
specifications of Petitioner's printer and are a necessary pre-production stage in the printing process.
They are produced for the sole purpose of making "printing plates" and have no value except to the
printer for their intended purpose as "intermediate" camera ready pages to be photographed by the
printer as an essential step in the printing process.
The final printed product, Freetime Magazine, is then sold by the printer to Petitioner for
distribution.
Freetime Magazine is not sold at retail but is given away.
Section 1115(a)(5) of the Tax Law provides an exemption from sales tax for newspapers and
periodicals.
Section 528.6(c) of the Sales and Use Tax Regulations sets forth the conditions that must be
met by a periodical in order to qualify for exemption from sales tax as follows:
(1)
In order to constitute a periodical, a publication must conform generally to the
following requirements:
(i)
it must be published in printed or written form at stated intervals, at least as
frequently as four times a year;
(ii)
it must not, either singly or, when successive issues are put together,
constitute a book;
(iii) it must be available for circulation to the public;
(iv)
it must have continuity as to title and general nature of content from issue to
issue; and
(v)
each issue must contain a variety of articles by different authors devoted to
literature, the sciences or the arts, news, some special industry, profession, sport or
other field of endeavor.
With respect to issue "1", Petitioner's publication, Freetime Magazine, meets all of the
criteria of section 528.6(c)(1) of the Sales Tax Regulations and thus qualifies as an exempt periodical
for sales tax purposes in accordance with Section 1115(a)(5) of the Tax Law.
Section 1105(a) imposes a tax upon "[t]he receipts from every retail sale of tangible personal

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TSB-A-95 (21)S
Sales Tax
June 21, 1995
property, except as otherwise provided in this article."
Section 1101(b)(6) defines tangible personal property as "Corporeal personal property of any
nature. . . ."
Section 1115(a)(12) exempts "Machinery or equipment for use or consumption directly and
predominantly in the production of tangible personal property . . . for sale . . . ." (Emphasis supplied)
With respect to issue "2", mechanicals and art work purchased by Petitioner are tangible
personal property in accordance with Section 1101(b)(6) of the Tax Law. Art work and mechanicals
used to produce newspapers and periodicals for sale qualify under section 1115(a)(12) of the Tax
Law as exempt production equipment. However, since petitioner's periodicals are given away rather
than sold, its purchases of typesetting and mechanicals are subject to sales tax.

DATED: June 21, 1995
s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE:

The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.