Does Utah sales tax apply to a commercial printer's charges for printing grocery store advertising inserts, including artwork/prepress services, when the inserts are distributed with newspapers versus delivered directly to stores?

Plain-English summary

An Arizona printing company setting up a Utah facility to print grocery store advertising supplements — most inserted into daily newspapers, a smaller number delivered directly to stores — asked the Commission to confirm the sales tax treatment of its printing, prepress/artwork, and delivery-method choices.

Printer's own purchases. Under Rule R865-19S-80, printers can buy paper, ink, and reusable prepress materials (like transparencies and engravings) tax-free for resale, as long as those items become a component of the final product sold to the customer, or (for prepress materials) title actually passes to the customer. If the printer instead consumes an item in production without it becoming part of the final resold product, or keeps title to it, the printer itself owes tax on that purchase as the final consumer.

Printer's charges to customers. Printing service charges are generally taxable — including charges for folding, cutting, and addressing the finished product — and the printer must also collect tax on any prepress materials that pass to the customer as part of the finished product. A customer can buy printing services tax-free with a resale certificate, but if the customer keeps materials (like prepress items) that aren't resold, the customer owes tax on those.

Artwork. A separate advertising agency's charge for designing artwork is generally not taxable. But if the printer's own service includes selecting type or suggesting artwork placement as part of producing the finished printed product, the entire charge for that finished product becomes taxable — the artwork piece doesn't carve out separately in that scenario. If the customer supplies its own artwork, there's no separate taxable charge for it; if the printer purchases artwork from an outside source, that purchase is taxable to the printer if consumed in production, or taxable to the customer if title to reusable artwork passes to them.

Newspaper inserts vs. store-delivered ads. This is the key distinction in the ruling: under Rule R865-19S-65, advertising inserts distributed together with newspapers are not subject to Utah sales tax at all — the printer need not collect tax on those. But the same printed advertisements, if instead delivered to the grocery stores for separate in-store distribution to customers, are subject to sales tax.

What this means for you

Commercial printers

Track carefully whether your printed product is destined for newspaper insertion or separate store/direct delivery — that single distribution-method fact determines whether the entire job is sales-tax exempt or taxable, independent of anything else about the print job itself.

Retailers and advertisers ordering printed inserts

If cost matters, distributing your ad supplement through newspaper insertion (rather than direct store delivery) can avoid Utah sales tax on the printing charge entirely. If you supply your own artwork rather than having the printer design it, that also keeps the artwork piece untaxed.

Accountants and tax professionals

Watch the artwork bundling trap: a printer merely selecting type or suggesting placement as part of the finished product pulls the entire charge into taxability, even though a stand-alone advertising agency's pure design services would not be taxable on their own.

Common questions

Q: Are advertising inserts distributed with newspapers taxable in Utah?
A: No — under Rule R865-19S-65, they're exempt entirely, regardless of who designed them or how they're produced.

Q: Are the same ads taxable if delivered directly to stores instead?
A: Yes — once the ads are delivered to the stores for in-store distribution rather than inserted in the newspaper, the printing charge becomes taxable.

Q: If my printer designs the ad layout as part of the print job, is that separately exempt from tax?
A: No. If the printer's own artwork/layout services are sold as part of the finished printed product, the entire charge — print plus artwork — is taxable.

Q: Does this ruling apply to my printing business?
A: Not automatically. This is a private letter ruling binding only on the Commission as to this taxpayer's specific facts. Another taxpayer can't rely on it as binding, though it may carry weight in a later appeal depending on how closely the facts match.

Citations and references

Statutes and rules:

• Utah Admin. Rule R865-19S-80 (printer purchases; resale exemption and consumer liability)
• Utah Admin. Rule R865-19S-65 (newspaper-inserted advertising exemption)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/96-015.pdf

Original ruling text

96-015

Response
January 26, 1996

Request

Re:
XXXXX

Dear
Sir or Madam,

XXXXX
is in the process of setting up business in Utah and would like to determine
the company's obligation, if any, to collect sales or use taxes on its gross
receipts. The purpose of this letter is
to request a tax ruling from the Utah State Tax Commission on the applicability
of Utah sales or use taxes on the following business activity.

XXXXX,
an Arizona based printing company, is in the process of setting up a printing
facility in Salt Lake City, Utah. XXXXX
prints grocery store advertising supplements which are inserted in and distributed
along with daily newspapers. In
addition to the actual printing of the ads, XXXXX helps the grocery stores
design the artwork for the ads including the layout of the items on sale, the
so called �prepress� activities.
Moreover, in addition to the ads which are distributed with the daily
newspapers, the company prints a comparatively smaller number of ads which are
delivered to the stores for use by regular customers.

In
a telephone conference with the sales tax technical research department of the Utah
State Tax Commission, we were advised that the company's sales were entitled to
an exemption if printing and art work services were sold together.

In
light of that advice we would like to obtain specific answers to the following
questions:

1. Are gross receipts from the printing of
   advertising supplements which are inserted in daily newspapers exempt from Utah
   sales and use taxes?

2. Are gross receipts from the printing of
   advertising supplements which are inserted in daily newspapers exempt from Utah
   sales and use taxes where the company provides artwork or prepress services
   along with the print material?

3. If printing and artwork services are
   provided, should the services be separately stated on each invoice?

4. Are gross receipts from the printing of
   advertising supplements exempt from sales and use taxes if the ads are
   delivered to the grocery stores instead of sold with the newspapers.

We
respectfully request that you research the above issues and respond to us as
soon as possible.

Please
call me if you require any additional information or have any questions.

Very
truly yours,

XXXXX

XXXXX

RE:
Advisory Opinion - Sales tax associated with printing charges

Dear
XXXXX,

We
have received your request for an advisory opinion regarding your client's
responsibility to collect and remit sales tax.
On the basis of the facts presented in your letter, we find as follows:

1. Printer's general obligation to pay sales
   tax on its purchases.

Under
Utah law, commercial printers and copy service businesses are entitled to
purchase certain materials and supplies tax free if those materials become a
component part of finished taxable goods produced for resale. For instance, printers may purchase such
items as paper and ink tax free if it is used to produce a final product for
resale. Printers may also purchase
reusable preress materials, such as transparencies and engravings tax free for
resale if title to the preress materials passes to the customer. Tax on these resale items is charged to the
printer's customer . Any items purchased tax free under a resale exemption
certificate, but consumed by the printer and not resold are taxable to the
printer.

Printers
are liable for sales tax on material and equipment that they purchase for their
own consumption in the printing process.
If the item does not become a component part of the final taxable
product, or if the printer retains title to it, the printer is considered the
final consumer for tax purposes. (See Utah Administrative Rule R865-19S-80
(copy enclosed)).

2. Printer's general obligation to collect
   sales tax on its sales.

Generally,
charges for printing services are subject to sales tax. Taxable charges include charges for folding,
cutting, and addressing the finished product.
The printer must also collect sales tax on charges associated with any
preress materials that pass to the customer as part of the sale of the finished
product.

The
printer's customer may purchase printing services tax free under a resale
exemption certificate. However, if the
customer retains any of the materials, such as pre-press materials which are
not resold, the customer is liable for tax on such items.

Artwork.

Charges
for services by an advertising agency to design artwork are not generally
taxable. However, a printer's services to select type or suggest placement of
artwork is usually sold as part of the final printed product. In that case, the entire charge for the finished
product is taxable.

If
the printer' s customer furnishes the artwork, there is no taxable charge
associated with it. If the printer
purchases the artwork from another source, the purchase is taxable to the
printer if it is consumed in the printing process, or taxable to the printer�s
customer if title to reusable artwork passes to the customer.

4. Printed materials for insertion in
   newspapers.

Advertising
inserts that are distributed with newspapers are not subject to tax. (See Utah Administrative Rule R865-19S-65
(copy enclosed)). Therefore, the
printer need not collect tax on inserts printed for distribution in
newspapers. However, printed
advertisements delivered to the customer for distribution in the store are
subject to sales tax.

Please
let us know if you have further questions.

For
the Commission,

Alice
Shearer

Commissioner