In deciding whether a shopping paper meets the 90%-advertising limit, is the area of inserted advertising supplements counted as part of the printed area?

Plain-English summary

The New York State Publishers Association (Syracuse) asked how to compute the advertising percentage of a shopping paper — specifically, whether the area of pre-printed advertising supplements (supplied by advertisers to be inserted into and delivered with the paper) must be counted as part of the publication's printed area.

Why it matters: to be an exempt "shopping paper" under Tax Law § 1115(i), a publication's advertisements must not exceed 90% of the printed area of each issue (and it must carry ads from numerous unrelated advertisers). Where the supplements are counted affects whether the paper clears that 90% line.

As originally decided, the Department held the supplement area must be included — but that conclusion was later reversed (see the box below).

• § 1115(i) exempts receipts from the retail sale of a shopping paper to its publisher, and from the printing services used to publish it, and sets the requirements a publication must meet to be a "shopping paper" (including the 90%-advertising cap).
• 20 NYCRR 528.6(e)(1) provides that advertising supplements distributed as inserts in a newspaper, periodical or shopping paper are considered part of that publication.
• So the Department originally held that, because an inserted advertising supplement is deemed part of the shopping paper, its area must be included when computing the advertising-versus-other-matter percentage.

Later modified — read this. In TSB-H-81(34.1)S (issued August 1983; see TSB-M-83(20)S), the Department modified this opinion to hold that where an advertising supplement is included as part of a shopping paper, the supplement's area is NOT to be included in computing the advertising percentage. That modified opinion — not this original one — states the Department's position on that point.

What this means for you

This 1981 opinion has been superseded on its key point. If you publish a shopping paper and are testing whether ads stay under the 90% printed-area threshold, the Department's current approach (from the 1983 modification) is to exclude the area of inserted advertising supplements from that computation — the opposite of what this opinion first said. Rely on the modified opinion.

The 90%-advertising test still governs shopping-paper status. However supplements are treated, a publication only qualifies for the § 1115(i) shopping-paper exemption if it carries ads from numerous unrelated advertisers and its advertising does not exceed 90% of each issue's printed area.

Watch for later guidance. Because the rule here was itself modified once, publishers should confirm the current treatment against the latest Department regulations and memoranda before relying on any single older opinion.

Common questions

Q: Do I count inserted advertising supplements in my shopping paper's ad percentage?
A: Under this original 1981 opinion, yes. But the Department modified that in TSB-H-81(34.1)S (1983), holding the supplement area is not counted. Follow the modified opinion.

Q: What's the shopping-paper advertising limit?
A: To qualify under § 1115(i), advertisements must not exceed 90% of the printed area of each issue, and the paper must carry ads from numerous unrelated advertisers.

Q: Why does a 1981 opinion carry a 1983 date in places?
A: The original opinion is dated February 1981. The Department's later modification, TSB-H-81(34.1)S, was issued in August 1983 and changed the result on the supplement-area question.

Citations and references

Statutes, regulations and authority:

• Tax Law § 1115(i) — exempts receipts from the retail sale of shopping papers (and related printing services) and sets the requirements for "shopping paper" status, including that advertising not exceed 90% of each issue's printed area
• 20 NYCRR 528.6(e)(1) — provides that advertising supplements distributed as inserts are considered part of the newspaper, periodical or shopping paper
• TSB-H-81(34.1)S / TSB-M-83(20)S — the Department's 1983 modification excluding the supplement's area from the advertising-percentage computation

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/h81_34s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-H-81(34)S
Sales Tax
February 24, 1981

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S801112C

On November 12, 1980 a Petition for Advisory Opinion was received from New
York State Publishers Association, 215 University Place, Newhouse Communications
Center, Syracuse, New York 13120.
The issue raised is whether, for purposes of the sales tax imposed under
Article 28 of the Tax Law, the "printed area" of a publication otherwise
constituting a shopping paper includes the area contained in pre-printed
advertising supplements, supplied by the advertiser to be inserted into and
delivered with the shopping paper, when computing the percentage of the area of
the publication devoted to advertisements versus the area devoted to other matter
such as news of general or community interest.
Section 1115(i) of the Tax Law exempts from the sales tax imposed under
Article 28 of the Tax Law "Receipts from the retail sale of a shopping paper to
the publishers of such publication" and "receipts from the sale of printing
services performed in publishing such paper." Such provision sets forth the
requirements which must be met by a publication in order for the same to
constitute a "shopping paper." Two of these requirements are (1) that the
publication contain in each issue advertisements from numerous unrelated
advertisers and (2) that such advertisements not exceed ninety per cent of the
printed area of each issue.
The Sales and Use Tax Regulations provide, with respect to advertising
supplements, that: "An advertising supplement is a publication consisting of
advertising, printed in the form of newspaper sheets or other form which is
distributed with a newspaper, mailed out directly, or used by retail stores as
handouts. Advertising supplements, when distributed as inserts in a newspaper,
periodical or shopping paper, are considered part of such newspaper, periodical
or shopping paper." 20 NYCRR 528.6(e)(1).
Accordingly, because an advertising supplement is deemed to be part of a
shopping paper, the area of the supplement must be included when computing the
percentage of the printed area of the publication devoted to advertising versus
the area devoted to other matter.

DATED: February 9, 1981

TP-8 (4/80)

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau

JAMES H. TULLY, JR., COMMISSIONER
LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR