Which printing and mailing-service charges were taxable, including folding, collating, labels, mailing lists, transportation, and postage?

Plain-English summary

The Comptroller classified folding and collating as taxable services that formed part of the sales price of printing, even when separately stated. Printing mailing labels was also taxable, and mailing-list rental was taxable as a sale of tangible personal property or information service.

Inserting printed items, affixing labels or postage, and sorting, bundling, tying, bagging, and depositing them in the mail could be nontaxable mailing services when performed after production. Separate statement alone did not control the result.

Seller-billed transportation of taxable items was taxable even if separately stated, while transportation billed directly by the carrier to the purchaser was not. Postage was taxable when the printer mailed printed items to the purchaser, subject to the conditions in Rule 3.303(d).

Common questions

Were folding and collating taxable? Yes, as part of the printing sale.

Which post-production mailing steps could be nontaxable? Inserting, affixing labels or postage, sorting, bundling, tying, bagging, and placing the items in the mail under the stated facts.

Were printed mailing labels and mailing-list rental taxable? Yes.

Was delivery taxable? Seller-billed transportation was taxable; direct carrier billing to the purchaser was not under the letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8901L1034F01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

January 12, 1989

Dear **:

Thank you for your letter of December 29, 1988, which follows-up our
recent telephone conversations concerning the taxability of mailing
services raised in your November 7, 1988 letter.

Printing of tangible personal property furnished directly or indirect-
ly by a customer has been defined as a sale since the enactment of
the sales tax law in 1961. Section 151.005(4) of the Texas Tax Code
(tax code). The tax code imposes a sales tax on the sales price of
the printing of tangible personal property. Section 151.051(a).
Section 151.007 defines "sales price" in paragraph (a) (2) as "the
total amount for which a taxable item is sold without a deduction for
the cost of. . . labor or service employed . . . or other expenses."
In paragraph (b) of the section "sales price" is further defined to
include "a service that is part of the sale. . ."

My response of November 17, 1988, needs to be clarified under the
statutory provisions cited in the preceding paragraph. However, be-
fore any clarification is made, I will respond to your request for
confirmation whether the following activities qualify as mailing ser-
vices:

1. collating

2. folding

3. inserting

4. affixing mailing labels and/or postage

5. sort, bundle, tie and bag per USPS regulations,
   and deposit in U. S. mail stream

6. printing mailing labels

7. mailing list rental

With the exception of the activities described in 3, 4, and 5 above,
the remaining activities do not qualify as mailing services.

The activities described in items 1 and 2 are services that are part
of the sales price of the printing as prescribed under Section
151.007(a)(2) and (b). This is consistent with the first example in
the copied page from Comptrollers Publication #96-185 (Texas Sales &
Use Taxes for Printers). In the first example, Acme Printing is re-
quired to charge sales tax on the separately stated charge for col-
lating and folding the advertising brochure it printed. Sales tax
would apply to a separately stated charge for collating. This is con-
sistent with the opinion given in my letter of November 17 except for
the charges for inserting, affixing mailing labels or postage, and
sorting and mailing.

The second example from publication #96-185, Acme Printing is re-
quired to print a report. After the report is printed, Acme is re-
quired to affix mailing labels and postage supplied by the customer.
According to this example, activities 3 through 5 would not be taxa-
ble when you perform them because they are performed after the pro-
duction of the printed item(s). The fact that the mailing services
are separately stated does not render the mailing services nontaxa-
ble. My response stands corrected in this regard.

The activity described in item 6 is taxable. Printing is a sale that
is taxable as discussed in the second paragraph of this letter. A
charge for mailing list rental is taxable as a sale of tangible per-
sonal property or as an information service as defined in Section
151.0038 of the tax code and section (a)(2) of Rule 3.342 Information
Services.

Effective October 1, 1987, charges for transporting taxable items
sold are taxable. Section 151.007(a)(3) and Rule 3.303 Transporta-
tion and Delivery Charges. This statutory change makes the transpor-
tation charges billed by a seller taxable even if the transportation
charges are separately stated. However, the transportation charges
are not taxable if the carrier bills the purchaser for the transpor-
tation and the seller charges the purchaser for the taxable item sold.
This makes the seller that charges for the transportation liable for
collecting sales tax on the transportation in a similar transaction.

Postage charges are taxable when you print items and mail them to the
purchaser. Mailing is considered transportation. Section (d) of Rule
3.303 outlines conditions under which postage charges are not taxable.

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, you may call toll-
free 1-800-252-5555, ext. 3-4683. The regular number is 512/463-4600.
You may write me at Tax Correspondence, Comptroller of Public Accounts.

Sincerely,
Eddie C. Washington
Tax Correspondence