Are financial-information publications about bond ratings exempt from Texas sales tax as 'magazines'?

Subject

Magazine — Definition And Subscription Service — Guidelines

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9401L1283D04

Plain-English Summary

The Comptroller was asked whether four publications ("Publication A" through "Publication D") were exempt from Texas sales tax as "magazines." The answer was no — not all magazines sold in Texas are exempt, and these particular publications did not qualify for the exemption at all.

Under Sec. 151.320(a), Texas only exempts subscriptions to magazines that are sold for a semiannual or longer period and are entered as second-class mail. Beyond that, Sec. 151.320(b) defines a "magazine" as a publication that is usually paperbacked and sometimes illustrated, appears at a regular interval, and contains stories, articles, and essays by various writers and advertisements. Critically, that same definition specifically excludes "the publication of current information," which is instead taxable under Sec. 151.0038 as an "information service."

Sec. 151.0038(a) defines an "information service" as furnishing general or specialized news or other current information — including financial information — unless it's furnished to a newspaper or to a radio or television station licensed by the FCC, or unless it involves electronic data retrieval or research. Sec. 151.0101(a)(10) then makes information services a "taxable service."

Because Publications A, B, C, and D all provided current financial information regarding bond ratings, the Comptroller determined they were taxable information services rather than exempt magazines. Sales tax had to be collected on the total charge for those publications sold in Texas. The letter also references Rule 3.342 (enclosed with the original letter) for additional guidance on taxable information services.

What This Means For You

If you publish or sell subscriptions to a periodical: Simply calling something a "magazine" does not make it exempt. To even be eligible for the Sec. 151.320(a) exemption, the item must be sold as a subscription for a semiannual or longer period and be entered as second-class mail — and it must fit the Sec. 151.320(b) definition of "magazine" (regularly published, paperbacked, with stories/articles/essays and advertisements).

If your publication's primary content is current news or current financial/other data (like bond ratings, stock quotes, or similar time-sensitive information): Expect it to be treated as a taxable "information service" under Sec. 151.0038, not an exempt magazine — even if it looks like a magazine in format. You must collect sales tax on the full charge.

Narrow exception to be aware of: Sec. 151.0038(a) excludes from "information service" taxation any current information furnished to a newspaper or to an FCC-licensed radio or television station. That carve-out did not apply to the publications at issue in this ruling.

Q&A

Q: Does calling a publication a "magazine" automatically make it exempt from Texas sales tax?
A: No. The Comptroller stated that "all magazines sold in Texas are not exempt." Even publications that look like magazines can be taxable if their content is current information — see Sec. 151.320(b) and Sec. 151.0038.

Q: Why were the four bond-rating publications in this ruling found taxable?
A: Because Sec. 151.320(b) expressly excludes "the publication of current information" from the definition of "magazine," and these publications provided current financial information about bond ratings. That made them "information services" under Sec. 151.0038(a), which Sec. 151.0101(a)(10) lists as a taxable service.

Q: What does qualify for the magazine subscription exemption under Sec. 151.320(a)?
A: Only subscriptions to magazines sold for a semiannual (six-month) or longer period that are entered as second-class mail, where the publication also fits the Sec. 151.320(b) definition of "magazine" (regular interval, paperbacked, stories/articles/essays, advertisements) and is not itself a publication of current information.

Citations

• Tex. Tax Code § 151.320(a) (magazine subscription exemption — semiannual or longer, second-class mail)
• Tex. Tax Code § 151.320(b) (definition of "magazine"; excludes publications of current information)
• Tex. Tax Code § 151.0038(a) (definition of "information service")
• Tex. Tax Code § 151.0101(a)(10) (information services are taxable services)

Original ruling text

January 20, 1994

Dear **:

Thank you for your letter concerning whether four publications are exempt from
Texas sales tax as "magazines".

All magazines sold in Texas are not exempt. Sec. 151.320(a) of the Texas Tax
Codeonly provides an exemption for:

Subscriptions to magazines that are sold for a semiannual or longer period and
are entered as second class mail...

In addition, Sec. 151.320(b) concerning the definition of a magazine reads as
follows:

"Magazine" means a publication that is usually paperbacked and sometimes
illustrated, that appears at a regular interval, and that contains stories,
articles, and essays by various writers and advertisements. "Magazine" does not
mean the publication of current information which is taxable pursuant to
Section 151.0038 of this code as an "Information Service".

Sec. 151.0038(a) states that an "information service" means:

. . . . . . furnishing general or specialized news or other current
information, including financial information, unless furnished to a newspaper
or to a radio or television station licensed by the Federal Communications
commission; or electronic data retrieval or research.

Finally, Sec. 151.0101(a)(10) of the Texas Tax Code provides that information
services are "taxable services".

Publication A, publication B, publication C, and publication D, all provide
current financial information regarding bond ratings. The sale of these
publications is the taxable sale of information services and sales tax must be
collected on the total charge for those publications sold in Texas. I have
enclosed Rule 3.342 with additional information regarding
taxable informationservices.

This opinion is based on the facts you submitted. Other facts, though similar,
may yield different results.

You may call me toll free at 1-800-531-5441, ext. 5-0030. The direct line is
512/475 0030. You may also write to Tax Administration, Comptroller of Public
Accounts.

Sincerely,

David Somerville
Tax Administration Division