Could a newsletter publisher buy film, film processing, and desktop publishing services for resale without Texas sales tax?

Plain-English summary

A publisher asked whether film, film processing, and desktop publishing used to produce a newsletter could be purchased tax-free for resale.

The Comptroller treated the newsletter publisher as providing an information service. Under Rule 3.342(e), an input qualified for resale only if the tangible personal property was transferred into the subscribers' care, custody, and control.

Because subscribers did not receive the film, processed film, or desktop-publishing materials themselves, the publisher had to continue paying sales tax on those items.

What this means for you

Using an item to create a product or service sold to customers does not by itself make that item a resale purchase. This letter focused on whether the customer actually received care, custody, and control of the property.

Common questions

What was the publisher selling? A newsletter, which the letter classified as an information service.

Which production inputs were at issue? Film, film processing, and desktop publishing.

Why did the resale claim fail? The subscribers never received care, custody, and control of those inputs.

Did STAR later add an alert? Yes. The source begins with an alert directing readers to Rule 3.285 for specific guidance on care, custody, and control when providing a taxable service, noting a November 1, 2017 amendment.

Citations and references

• 34 Tex. Admin. Code Rule 3.342(e) — information-service purchases qualifying for resale
• 34 Tex. Admin. Code Rule 3.285 — later STAR alert on resale certificates and care, custody, and control

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9106L1112F11

Original ruling text

ALERT: For specific guidance relating to the care, custody and control of TPP when providing a taxable service, please see Rule 3.285, Resale Certificates; Sales for Resale (amended 11/01/2017.

June 3, 1991

Dear **:

Thank you for your recent letter concerning sales tax exemptions
for the film, film processing, and desk top publishing that are
used to produce your newsletter.

As a publisher of a newsletter for sale, you are providing an
information service. You can only issue a resale certificate for
those items or services that qualify according to Rule 3.342(e) on
information services. The tangible personal property must be
transferred to the care, custody, and control of your subscribers
in order to be considered a valid sale for resale.

The film, film processing, and desk top publishing are not
transferred to the care, custody, and control of your subscribers.
You will need to continue to pay sales tax for these items. I
have enclosed Rule 3.342 for your information.

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

You may call me at 463-3690. You may also write to Tax
Administration at the above address.

Sincerely,

David Somerville
Tax Administration Division