Which charges by a public relations/advertising firm — campaign coordination, ad production, air time, copywriting, graphic design, printing, mailing lists, postage, billboards, and specialty items — are taxable in Texas?

Subject

Press Or News Release/Public Relations Services — Charges

Plain-English summary

A public relations/advertising firm asked the Comptroller to sort out the taxability of a long list of the services and charges it bills to clients. The Comptroller answered item by item.

Not taxable: campaign coordination (setting up radio/TV interviews and purchasing media and print advertising), producing radio and television advertisements (creating a master audio or video recording), purchasing radio or television air time, public relations (writing copy for speeches and press releases), purchasing newspaper advertising space, and purchasing billboard advertising space.

Taxable to the customer: graphic design (creating a logo or other graphic arts), printing (brochures, bumper stickers, buttons, and yard signs), the mailing list itself, and specialty items. For each of these, the firm can buy the underlying materials or services tax-free from its own suppliers by issuing a resale certificate, since it's collecting tax from the customer on the resale.

Postage is conditional: tax is due on postage billed to the client when the postage is connected to the sale of a taxable item (for example, mailing bumper stickers to the client) — see section (a) of Rule 3.303. But tax is not due on separately stated postage charges when the firm mails items to a third party at the client's request (for example, mailing the client's brochure to names taken from a mailing list) — see section (d) of Rule 3.303.

The letter notes this opinion is based on the facts presented and could change if the facts were different.

What this means for you

Public relations and advertising agencies

Sort your invoice line items by this framework: media placement, ad production, air time, PR copywriting, print-ad space, and billboard space are not taxable services. But graphic design, printing, mailing lists, and specialty/promotional items are taxable to your customer — collect tax on those, and use a resale certificate when you buy the underlying materials or subcontracted services (like printing) so you aren't taxed twice.

Firms billing clients for postage or delivery

Whether postage is taxable turns on what it's attached to. If you're mailing a taxable item (like printed bumper stickers) to the client, collect tax on the postage under Rule 3.303(a). If you're mailing items to third parties at the client's request (like a mailing-list-driven brochure drop), the separately stated postage charge is not taxable under Rule 3.303(d).

Accountants and tax professionals advising marketing/PR clients

This letter is a useful item-by-item taxability map for a marketing services business: it distinguishes pure service/media-buying activities (not taxable) from the sale of tangible personal property such as printed materials, graphics, mailing lists, and specialty items (taxable), and it walks through the resale-certificate mechanics for each taxable category.

Common questions

Q: Is public relations copywriting taxable in Texas under this ruling?
A: No. The letter states public relations — writing copy for speeches and press releases — is not taxable.

Q: Is graphic design work taxable?
A: Yes. The firm must collect tax from its customer for charges to create a logo or other graphic arts, though it may buy the underlying materials tax-free from suppliers using a resale certificate.

Q: Do I owe tax on postage I bill to a client?
A: It depends. Tax is due on postage connected to the sale of a taxable item (Rule 3.303(a)), such as mailing bumper stickers to the client. Tax is not due on separately stated postage when mailing items to a third party at the client's request (Rule 3.303(d)), such as a brochure mailed to names on a mailing list.

Q: Is printing (brochures, bumper stickers, buttons, yard signs) taxable?
A: Yes, charges to the customer for printing these items are taxable. The firm may issue a resale certificate to the printer instead of paying tax on the printing service itself.

Q: Is buying billboard space or newspaper ad space taxable?
A: No. Purchasing space to advertise on a billboard and purchasing advertising space in a newspaper are both described as not taxable.

Citations and references

• Rule 3.303, section (a) — tax due on postage connected to the sale of a taxable item
• Rule 3.303, section (d) — tax not due on separately stated postage when mailing to a third party at the client's request

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9609L1437G11

Original ruling text

September 20, 1996

Dear **:

Thank you for your letter of September 10, 1996. You
asked that we address the taxability of the following items.

Campaign coordination - You stated this involves
setting up interviews with radio and television stations and purchasing
advertising for media and print. This service is not taxable.

Production of radio and television advertisements -
Creating a master of an audio or video recording is not taxable.

Air time on radio and television - Purchasing radio or
television time slots for advertising purposes is not taxable.

Public relations - This involves writing copy for
speeches and press releases. This service is not taxable.

Newspaper ads - Purchasing advertising space in a
newspaper is not taxable.

Graphic Design - You are required to collect tax from your customer
for charges to create a logo or other graphicarts. You may purchase
materials that are transferred to your customer tax free by issuing
a resale certificate to your suppliers.

Printing - Charges to your customer for printing brochures, bumper
stickers, buttons, and yard signs are taxable. You may issue a
resale certificate to the printer in lieu of paying tax on this service.

Mailing list - The charge for the mailing list is taxable to your
customer. You may issue a resale certificate to your vendor in
lieu of paying tax on the list.

Postage - Postage may be taxable depending on how it is used. For
example, tax is due on postage you bill your client when connected
to the sale of a taxable item. You should collect tax on postage
or delivery charges when you mail bumper stickers to a client. Please
refer to section (a) of Rule 3.303.

On the other hand, tax is not due on separately stated charges for
postage when you mail items to a third party at the request of your
client. For example, if you mail the client_s brochure to names
taken from a mailing list, tax is not due on the postage. Please
refer to section (d) of Rule 3.303.

Billboards - Purchasing space to advertise on a billboard is not taxable.

Specialty items - Tax is due on the sale of specialty items to your
customer. You may purchase the specialty items tax free by issuing
a resale certificate to vendors.

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

You may call me toll free at 1-800-531-5441, ext. 5-0037. The direct
line is 512/475-0037. You also may write to Sales Tax Policy Division,
Comptroller of Public Accounts.

Sincerely,

Lindey Osborne
Sales Tax Policy Division

NOTE: Previous Accession Number 9609687L