How did Texas tax an association's member journal, magazine subscriptions, textbook sales by a Section 501(c)(3) organization, and out-of-state artwork?

Plain-English summary

The combined STAR document addressed publications, textbooks, and artwork.

Member journal or magazine

A journal or magazine was treated as sold to members when the publication stated a sales price. The association could then buy the printing tax-free. If the publication was given to members without charge, the association paid sales tax to the printer.

A subscription for six months or longer sent by second-class mail was not subject to sales tax. Single-copy sales were taxable.

Textbooks sold by an exempt organization

The later letter clarified that a Section 501(c)(3) subsidiary bought textbooks from an out-of-state source and sold them directly to pharmacists. Although the organization could be exempt on taxable items bought for its own use, it still had to collect tax on taxable textbooks it sold.

Out-of-state artwork

Artwork resold as part of the association's publications could be bought without tax. If it was not resold, the association owed Texas tax on the purchase price and had to report the tax directly if the out-of-state artist did not collect it.

What this means for you

The historical result distinguished items bought for resale from items consumed by an exempt organization. Exempt status did not eliminate the duty to collect tax on the organization's own taxable retail sales.

Common questions

When could publication printing be bought tax-free? When a stated sales price showed that the journal or magazine was sold to members.

Were long-term subscriptions taxable? Not when sold for at least six months and sent by second-class mail.

Did the Section 501(c)(3) subsidiary collect tax on textbooks? Yes.

Was out-of-state artwork taxable? Not when resold; otherwise Texas tax was due.

Citations and references

The document cites no numbered statute or rule beyond identifying the subsidiary as a Section 501(c)(3) organization.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8802L0890G10

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

February 17, 1988

Dear ***:

Mr. Dan Pearson asked that I respond to your recent letter.

You explained the monthly journal is "sold" to members via their payment
of
membership. You asked if the statement contained in the journal is
sufficient to permit sales tax exemption on the journal printing. A copy
of
the statement was not enclosed as indicated.

The journal will be considered sold to the members if a sales price of
the
journal is included in the statement. The printing of journals for sale
can
be purchased tax free.

You also asked about collection of sales tax on text books sold to
pharmacists. You explained that a subsidiary which is a 510(c)(3)
organization purchases the text books form an out-of-state source and
then
itself sells the books directly to pharmacists. The association is not
directly involved.

The 501(c)(3) organization must collect tax on the sale of text books.
While
the organization may be exempt form paying sales tax on taxable items
purchased for its own use, the organization is not exempt from collecting
the
tax on taxable items it sells.

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 our
toll-free
number 1-800-531-5441. The regular number is 512/463-4600. You may
write me
at the Tax Policy Division.

Sincerely,
(Mrs.) Jo Ann Dieck
Tax Policy Division

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

December 14, 1987

Dear ***:

At your recent association meeting, you asked several questions that I
have
checked into for you.

You explained that your association prints a magazine for sale to its
members,
and asked whether the charge you pay for printing is taxable. The answer
is no. When you publish a magazine for sale to your members, you may
purchase the printing tax free. Your magazine is considered to be sold
(rather than given to you or members as part of the benefits of
membership) if
you specify a sales price to the members for the magazine. This can be
done
by including a statement of price in the magazine.

If you sell the magazine for a subscription period of six months or
longer and
send it to your members by second class mail, no sales tax is due on the
subscriptions. Sales of single copies of the magazines are taxable.

If you give the magazine to your members without charge, you should pay
sales tax to your printer.

Your association also purchases textbooks from its subsidiary which is a
501(c)(3) organization. The textbooks are sold to pharmacists. You
should
collect sales tax on the sale price you charge for the books.

You occasionally use an artist located out of state who ships the artwork
to
you here. If the artwork is resold, for example as part of your
publications,
no tax is due on the artwork. If not, you should pay Texas tax on the
purchase price. If the artist does not collect and report Texas tax on
his
sales to you, you must report the tax directly to the Comptroller's
Office.

Please feel free to contact me at (512)463-4006 if you have additional
questions.

Sincerely,
Dan Pearson
Deputy Comptroller