Ezel / Tax Rulings / TX
TX 9609L1441C10 Sales and/or Use Tax (State,Local,MTA) 1996-09-18

Can a custom flexible packaging manufacturer bill for artwork and printing plates without charging sales tax if the customer provides a manufacturer's exemption certificate?

Short answer: Yes. The Comptroller confirmed that when a company bills customers for artwork and plates used in manufacturing custom flexible packaging, no state or local sales tax needs to be charged, as long as the customer has given the company a completed manufacturer's tax exemption certificate.

Apply this to your situation

This page answers the general question as of 1996. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1996
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Subject

Artwork And Plates (Includes Customer Logo, Product Description) Provided To Customers As Part Of Process Of Manufacturing Custom Flexible Packaging

Plain-English summary

A company that manufactures custom flexible packaging bills its customers for artwork and printing plates as part of that manufacturing process. The plates are created from artwork that includes the customer's logo, product description, government-required content, and nutritional information, and the plates are then mounted on the press used to print the film.

The company asked the Comptroller whether it had to charge state or local sales tax when billing customers for this artwork-and-plates service, provided the customer had given the company a completed manufacturer's tax exemption certificate. The Comptroller's response: "That is correct" -- no sales tax needs to be charged in that situation.

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

What this means for you

Custom packaging and printing manufacturers

If you bill customers separately for artwork and plates that are part of manufacturing custom flexible packaging (or a similar printed product), this ruling supports treating that charge as exempt from state and local sales tax -- but only if the customer has furnished you with a completed manufacturer's tax exemption certificate. Without that certificate on file, this exemption treatment would not apply.

Accountants and tax professionals

This letter confirms that artwork and plate charges billed as part of a manufacturing process can ride on the customer's manufacturer's exemption certificate, similar to other inputs into a manufacturing process. Make sure clients in the packaging/printing industry are collecting and retaining valid exemption certificates before excluding these charges from tax.

Common questions

Q: Do I have to charge sales tax when billing a customer for artwork and plates used to manufacture their custom flexible packaging?
A: No, according to this ruling, as long as the customer has given you a completed manufacturer's tax exemption certificate.

Q: What do the plates and artwork actually include?
A: The artwork includes the customer's logo, product description, government-required content, and nutritional information; the plates are made from that artwork and mounted on the press used to print the film.

Q: What happens if the customer doesn't provide an exemption certificate?
A: The letter doesn't address that scenario directly -- it only confirms the exempt treatment applies "providing our customers have given [the company] a completed manufacturer's tax exemption certificate."

Q: Could this outcome change under different facts?
A: Yes -- the letter states the opinion is rendered based on the facts presented, and the opinion may change if there are additional or different facts.

Source

Original ruling text

September 18, 1996

Dear **:

Thank you for your recent letter which is restated in part with response below.

Artwork and plates are a service provided by ** and billed to our
customers as part of the process of manufacturing custom flexible packaging.
The plates are the result of the artwork which includes customer logo, product
description, government-required content and nutritional information, etc.. The
plates are then mounted on the press used to print the film.

It is our understanding that when billing our customers for the process
described above (artwork and plates) we do not have to include state or local
sales tax, providing our customers have given ** a completed
manufacturer's tax exemption certificate.

Response: That is correct.

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

You may call me toll free at 1-800-531-5441, ext. 3-4680. The direct line is
512/463-4680. You may also write to Tax Policy, Comptroller of Public Accounts.
My Internet address is [email protected].

Sincerely,

Al Van Allen
Tax Policy Division

NOTE: Previous Accession Number 9609789L

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