Is a subscription publication made up mostly of attorney-written trial reports exempt from Texas sales tax as a magazine, even though it looks and is delivered like one?

Plain-English summary

A publisher argued that its subscription publication should be exempt from Texas sales tax as a magazine -- it's paperback, illustrated, published on a regular schedule, contains stories/articles/essays and ads, sold semiannually or longer, and delivered by second-class mail. The Comptroller ruled it isn't exempt. A 1993 amendment to Tax Code § 151.320 carved current-information publications out of the "magazine" definition if they're already taxable as an "information service" under § 151.0038. This publication's bulk is trial reports: the publisher gathers facts from various courts and requests a detailed write-up from the attorneys who actually tried or settled each case. That's exactly what Rule 3.342(b) defines as a taxable information service -- information gathered, maintained, or compiled and made available to the public (or a specific industry segment) for a fee. So regardless of its magazine-like packaging, the publication is taxed as an information service. Sales to Texas residents are taxable; sales mailed to out-of-state addresses aren't, but the publisher needs to document those out-of-state sales (e.g., with postal receipts).

What this means for you

Publishers of subscription trade/professional publications

Looking like a magazine (paperback, illustrated, regular publication schedule, ads, subscription sales) doesn't get you the magazine exemption if the substance of what you sell is current, gathered/compiled information -- that's taxed as an information service instead, per the 1993 amendment to § 151.320.

Legal publishers and litigation-reporting services

Trial reports built from court records plus attorney write-ups of case outcomes are a textbook example of a taxable information service under Rule 3.342(b) -- gathering facts and making them available to a specific audience for consideration is the trigger, not the publication's format.

Accountants and tax professionals

Watch for the § 151.320/§ 151.0038 interaction whenever a client's "magazine" is substantively a compiled-information product (legal, financial, market, or industry reports) -- the format tests that used to matter for the magazine exemption were superseded by this information-service carve-out.

Common questions

Q: Does looking and being sold like a magazine qualify a publication for the magazine sales tax exemption?
A: Not necessarily, per this letter -- if the substance is current, gathered information taxable as an "information service" under § 151.0038, the magazine exemption doesn't apply even if every physical/format characteristic of a magazine is present.

Q: Are trial reports compiled from court records and attorney write-ups a taxable information service?
A: Yes, per this letter, under Rule 3.342(b)'s definition of information gathered/compiled and made available for consideration.

Q: Is tax due on copies mailed to subscribers outside Texas?
A: No, per this letter -- but the publisher must keep documentation (such as postal receipts) proving the out-of-state sales.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.320 (magazine exemption; excludes information-service publications, per 1993 amendment)
• Tex. Tax Code § 151.0038 (definition of taxable "information service")
• 34 Tex. Admin. Code Rule 3.342(b) (taxable information service defined)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9705370L

Original ruling text

May 12, 1997

Dear ***:

Thank you for your letter of April 25, 1997. You asked whether sales of a
client's publication are exempt as the sale of a magazine subscription.

You pointed out the publication has all the characteristics of a magazine in
that it is paperback and illustrated; published at regular intervals; contains
stories, articles, and essays by various writers; contains advertisements, sold
for a semiannual or longer period, and delivered by second class mail.
However, 151.320 of the Texas Tax Code was amended effective September 1, 1993
to state:

"Magazine" does not mean the publication of current information which is
taxable pursuant to Section 151.0038 of this code as an "information service".

The bulk of the publication consists of trial reports. You stated that your
client collects the pertinent facts from various courts and requests a detailed
write-up by the attorneys who tried or settled the case.

Section (b) of Rule 3.342 defines a taxable information service as information
which is gathered, maintained, or compiled and made available by the provider
of the information service to the public or to a specific segment of industry
for a consideration. The publications you submitted meet this definition.
Therefore, your client must collect sales tax on sales of the publication to
residents in Texas. Publications mailed outside of Texas by your client are
not subject to Texas sales or use tax. Your client must maintain sufficient
documentation, such as postal receipts, to document out-of-state sales.

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