Was advertising space in a free periodical taxable, and who owed sales or use tax on the periodical's materials, printing, and publisher charges?

Plain-English summary

The Texas Comptroller said sales of advertising space in the publication were not subject to sales tax. The operator nevertheless owed sales or use tax on all materials and printing costs used to produce the freely distributed periodical.

If the publisher was in Texas, it was to collect sales tax on the total publication charge. If the publisher was out of state, the total charge for periodicals mailed to the operator was subject to use tax. Under the physical-presence rule stated in the 1987 letter, if the publisher was not required to collect, the operator had to remit use tax directly to the Comptroller.

What this means for you

Nontaxable advertising revenue did not make the periodical's production inputs exempt. The operator was the taxable consumer of the publication and printing.

Common questions

Was advertising-space revenue taxable? No.

Were the publication's materials and printing costs taxable? Yes.

What did a Texas publisher do? Collect sales tax on the total publication charge.

What about an out-of-state publisher? The charge was subject to use tax; the 1987 letter assigned direct remittance to the buyer when the publisher lacked physical presence and did not collect.

Is the physical-presence collection standard current? This historical letter does not establish current nexus law.

Citations and references

• Comptroller Rule 3.346 — Use Tax.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8703L0808D02

Original ruling text

March 5, 1987

Dear **:

Thank you for your recent letter concerning the taxability of your PUBLICATION.

The sale of advertising space is not subject to sales tax. However, you must
pay sales or use tax on all materials and printing costs involved in the
production of this freely distributed periodical.

If the publisher is located in Texas, he should collect sales tax from you on
the total charge for the publication. If the publisher is out-of-state, the
total charge for periodicals mailed to you is subject to use tax. If the
publisher has no physical representation in Texas and is not required to
collect the use tax, then you must remit the tax directly to the Comptroller's
office. Rule 3.346, Use Tax is enclosed for your reference.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Administration Division.

Sincerely,

Julie Pesl
Tax Policy Section
Tax Administration Division