Did a post-production company collect Texas sales tax for adding sound effects to a television-program master?

Plain-English summary

The requester added sound effects to television programs. The Comptroller said fees were not subject to sales tax when the company added sound effects to a motion-picture master under a producer's direction, because the company was treated as a production or post-production company under Rule 3.350.

The service provider nevertheless owed Texas sales or use tax on everything it used to perform the work. The letter specifically included the purchased compact-disc library of sound effects.

What this means for you

A nontaxable production fee did not create a resale exemption for the provider's tools and content library. The scope of the service and the producer's direction were part of the stated facts.

Common questions

Did the provider collect tax on its sound-effects fee? No on the described producer-directed master work. Was the compact-disc library exempt? No; the provider owed sales or use tax on it. Did the letter classify the provider? Yes, as a production or post-production company.

Citations and references

• 34 Tex. Admin. Code Rule 3.350(b)(2)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9201L1149F05

Original ruling text

January 2, 1992

Dear **:

Please accept my apology for the delay in responding to your
letter concerning your charges for sound effect added to a
television program.

If you are adding sound effects to a motion picture master under
the direction of a producer, then you should not collect sales tax
on your fees for this service. You are considered a production/
post-production company. Please review the enclosed Rule 3.350 on
motion pictures.

You owe Texas sales or use tax on all items used to provide your
service, including the library of sound effects on compact discs
that you purchased. See section (b)(2) of the rule.

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

Please feel free to contact me if you have any additional
questions about my response. You may write me, call toll free
1-800-252-5555, ext. 34685, from anywhere in the United States or
phone (512) 463-4685.

Sincerely,

Julie Pesl
Tax Administration Division