Were lump-sum charges for billboard advertising space and temporary shape extensions taxable, and what if an outside company performed the alteration?

Plain-English summary

The outdoor-advertising company supplied billboards and modified them to customer specifications. Temporary wood or metal extensions projected beyond the normal rectangular shape—for example, a can extending above the billboard.

The company charged monthly lump sums for billboard space and separate lump sums for extensions. Its advertising-space charges were nontaxable. Its extension charges also were nontaxable because they represented added advertising space rather than real-property repair or remodeling.

The company paid tax on taxable items used to provide those services.

If the billboard owner hired another company to change a billboard face or add an extension, the owner paid tax on that purchased service because it was real-property remodeling.

The source says customer or company artists supplied ideas but no finished artwork was sold or separately billed, so it does not decide a separate art sale.

Common questions

Was billboard advertising-space rent taxable? No.

Were the company's own extension charges taxable? No.

Was an outside company's alteration service taxable to the billboard owner? Yes.

Did the letter decide separately sold artwork? No.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8908L0958G05

Original ruling text

August 31, 1989

Dear **:

Thank you for your inquiry regarding the taxability of extensions added to
billboards.

You state that you are in the outdoor advertising business. In our phone
conversation of August 15, you indicated that this involved "leasing"
billboards to your customers. Specifically, you provide the billboard and the
materials and labor to modify the billboard to your customer's specifications.

You also stated that the art work for the signs is either furnished by your
customer or by your artists. However, I understand that you don't actually sell
any finished art to your customer. That is, you merely furnish the ideas and
incorporate these into the billboard. The billings that you submitted indicate
that you don't bill an extra charge for furnishing the artwork.

You indicated that you have advertising sales which are classified as
commercial sales. This involves extra charges to your customer for extensions
to the billboard. The extensions are additional wood or metal pieces attached
temporarily to the existing structure. The extensions extend beyond the regular
rectangular shape of the billboard for added effect (such as a coke can
extending above the billboard).

The contracts and billings that you submitted indicate that you bill your
customer a monthly lump-sum charge for the billboard. Likewise, you bill a
lump-sum charge for the sign extensions.

Your charges for leasing advertising space on your billboards aren't taxable.
Therefore, you must pay tax to your suppliers on all taxable items used in
providing this service.

Likewise, your charges for extensions to the billboard aren't taxable. That is,
the charge isn't taxable as real property repair and remodeling because it is
merely a charge for additional advertising space. Again, you should pay tax on
taxable items used in providing this service.

However, charges to change billboard faces or to add extensions to existing
billboards would be taxable if you hired another company to perform these
services on your billboards. Under these circumstances, you should pay tax on
the services because the services would be taxable as real property remodeling.

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

If you have any questions, please contact Tax correspondence. You may call
toll-free 1-800-252-5555, or our regular number is 512/463-4600. My extension
is 3-4662.

Sincerely,

Bob Jeffcoat
Tax Correspondence