Did a coupon-book company pay Texas tax on printing booklets containing postage stamps, and were the supermarkets' stamp sales taxable?

Plain-English summary

A marketing company hired a printer to manufacture coupon booklets, attach postage stamps, and ship the finished books to supermarket distribution facilities for resale. The supermarkets paid less than the face value of the stamps included in each book.

The company owed tax on the printing and could not issue the printer a resale certificate. The supermarkets' sale of the postage stamps to customers was not taxable.

Printing charges were exempt for booklets the printer delivered by common carrier to locations outside Texas. The company had to retain the carrier's bills of lading and records showing the number of booklets and the out-of-state purchaser receiving them.

Common questions

Could the coupon-book company give the printer a resale certificate? No.

Were the supermarkets' postage-stamp sales taxable? No.

When was the printing charge exempt? When the printer shipped the finished books by common carrier outside Texas and the company kept the required records.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8910L0960C01

Original ruling text

October 4, 1989

Dear ***:

Thank you for your letter regarding taxability of coupon books containing
postage stamps.

You stated that your client is in the business of compiling and selling books
of manufacturer sponsored supermarket coupons as part of an intensive marketing
campaign. Included in the coupon books are postage stamps. The coupon books
are sold to supermarket chains nationwide for less than the value of the
stamps.

Your client contracts with a printing company for the custom manufacture and
packaging of the coupon books containing postage stamps. The printing company
prints and binds the coupons and affixes the postage stamps to the booklet.
Upon completion, the printing company ships the finished goods via common
carrier to the supermarkets' distribution facilities for resale by the
supermarket chain. The supermarket chains in question, have facilities both
within and without the State of Texas.

You also stated that the supermarket chain may view the transaction between the
supermarket and its customers to be that of the sale of postage stamps for a
discounted price.

I agree with Mr. Eddie Washington's June 16, 1989, response to your letter of
June 5, 1989. Your client owes tax on the printing and may not issue the
printer a resale certificate in lieu of the tax. The sale of the postage
stamps by the supermarket chain is not taxable.

The charge for printing the booklets which the printer delivers via common
carrier to a location outside Texas would be exempt from Texas tax. Your
client must have copies of the bills of lading from the carrier and
documentation showing the number of booklets and out-of-state purchaser to whom
they were shipped by the printer.

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 or the regular number 512/463-4600. My extension is 3-4666.
You may write to Tax Correspondence, Comptroller of Public Accounts.

Sincerely,

Jo Ann Dieck
Tax Correspondence