Does Utah sales tax apply to a graphic designer's charges for brochures, newsletters, business cards, and web page design?

Plain-English summary

A home-based graphic designer — notably, one of the earliest people to request a Utah ruling by e-mail — asked whether sales tax applied to charges for brochures, newsletters, advertisements, business cards, stationery, and web page design. The designer typically creates the layout/artwork on computer, hands files off to a typesetter and printer (who bill the client directly for their own work), and bills the client hourly for design time, press checks, and reviewing pre-press film.

The Commission gave several distinct answers depending on what's actually sold:

• Web page design was not taxable at the time of this 1996 ruling — though the Commission flagged that the legislature was then conducting a telecommunications study that could later change the tax status of online services.
• Sales of business cards, newsletters, brochures, or other printed material are taxable, and critically, all services connected with that sale — including design charges — are taxable too. You cannot carve the design-service portion out of a taxable printed-product sale to avoid tax on that piece.

There are three exceptions to that taxable-printed-material rule:

1. Resale exemption. If the customer buys the printed material to resell it, that sale to the customer is exempt (the retailer collects tax on the later sale to the end customer, and the designer must get a resale exemption certificate on file). But this has a nuance: if the designer sells a reproducible "master" of the artwork (printed, on disk, or CD) that the customer uses to make thousands of copies, the sale of the master itself is taxable because the master is not what gets resold — only actual copies made for resale qualify for the exemption, and if both a master and resale copies are sold together, the master and any non-resold items must have tax charged, with the resale-copy charges kept tax-free only if separately stated on the invoice.
2. Out-of-state delivery. If the designer delivers or ships the finished printed material out of state (e.g., to a Nevada customer, by the designer or a common carrier) as a condition of the sale, the sale is exempt from Utah sales tax.
3. Newspaper inserts. Printed artwork produced and delivered for distribution as a newspaper insert is not taxable, since Utah Admin. Rule R865-19S-65 makes newspaper sales themselves nontaxable.

The ruling also explains the vendor chain: typesetters, artists, and other vendors who supply materials to a printer that sells the final product must collect tax on their own sales unless the printer gives them a resale exemption certificate. So if a client hires a printer directly to print 1,000 brochures, the printer can buy the designer's graphic-design work tax-free with a resale certificate; conversely, if the designer is the one selling the final printed product to the client, the designer can buy typesetting/printing services tax-free with a resale certificate given to those vendors. But if the client buys design, typesetting, and printing separately and directly from each vendor, sales tax applies to each of those individual transactions.

Finally, the ruling covers what the designer's own purchases should look like: materials that become a physical component of the finished taxable product (like paper) can be bought tax-free for resale, but items merely consumed in the design/production process and not becoming part of the final product — such as non-custom desktop publishing software — must be purchased with sales tax paid at the time of purchase.

What this means for you

Graphic designers, freelance artists, and small design studios

If you sell a final printed product (brochures, cards, newsletters) to your client, your entire invoice — including your design-service hours — is taxable, even though design work standing alone (like web design, per this 1996 ruling) might not be. How your work is packaged and delivered to the client determines its tax treatment, not just the nature of the labor.

Designers who sell reproducible "masters" for a client to duplicate

Be careful with master art files or plates sold for the client's own reproduction: the master itself is taxable even if the copies the client later makes and sells are not. Track and separately invoice resale copies versus the master to preserve the exemption on the resale portion.

Businesses that route work through printers, typesetters, or other subcontractors

If you're supplying a component (like design work) to a printer who sells the finished product, get a resale exemption certificate from the printer to buy/sell that component tax-free — otherwise you must collect tax on your own sale even though the printer's later sale is also taxed, avoiding double taxation only if the certificate chain is followed correctly.

Accountants and tax professionals

This ruling is a clean illustration of Utah's "true object"/bundling approach for creative-services-plus-tangible-product transactions, plus the mechanics of the resale-certificate chain across multiple vendors in a single supply chain, and a useful historical marker for when web design was clearly nontaxable in Utah (subject to change pending legislative telecom study).

Common questions

Q: I design a brochure and have it printed and delivered to my client — is my whole invoice taxable?
A: Yes. If you're selling the final printed product, the entire charge, including your design-service time, is taxable, unless one of the three exceptions (resale, out-of-state delivery, newspaper insert) applies.

Q: Is web page design taxable in Utah?
A: Not under this 1996 ruling, though the Commission noted a pending legislative telecommunications study that could change the tax status of online services going forward — confirm current treatment before relying on this for a modern transaction.

Q: I sell a master artwork file that my client reproduces into thousands of copies for resale — is that taxable?
A: Yes, the sale of the master itself is taxable because the master is not what gets resold; only the copies actually intended for resale (with a resale certificate on file) are exempt.

Q: Can I buy paper and printing supplies tax-free?
A: Only items that become a physical component of the finished taxable product (like paper) qualify for tax-free purchase for resale. Tools and supplies you merely consume in production, like non-custom desktop publishing software, must be purchased with tax paid.

Citations and references

Statutes and rules:

• Utah Admin. Rule R865-19S-65 (newspapers are not taxable; extends to newspaper inserts)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original page: https://files.tax.utah.gov/tax/commission/ruling/96-079.htm

Original ruling text

96-079

Response
May 8, 1996

Request

April
19, 1996

Hello
XXXXX!

Thanks
for your help to date. We spoke on the phone earlier in the week regarding my
sending you e-mail describing my business activities in order to determine
sales tax exemption status.

Here's
a brief description of my business, XXXXX, Account No. XXXXX.

I
am a graphic designer working from home. I create sales brochures, newsletters,
advertisements, direct mail pieces, trade show graphics, signs, business cards
stationery, etc. for my clients. I also design and maintain World Wide Web
pages on the Internet for clients. All of the materials produced are used by
the client as marketing tools for their products.

The
client will typically provide me with some concept of what they are trying to
achieve and/or provide me with rough text and graphics. I then design the
layout or artwork on a computer.

If
any typesetting is required, I deliver the files by modem or disk to the
typesetter who then bills the client directly for the film produced. The film
from the typesetter is delivered by myself or the client to the printer who
produces the printed piece and then bills the client directly

for
the printing.

I
then bill the client for my time on a hourly basis, with no markup for
typesetting or printing costs, since the client is billed directly by the
printer and typesetter. I charge by the hour for my time reviewing pre-press
film and performing press checks at the printer. It's all pretty

straightforward.

Please
advise me as to your determination by return e-mail in addition to the official
letter, or e-mail me if you need further information.

Hope
I'm not too late to still be the first to request a determination over the
Internet!

Thanks
again.

Regards,

XXXXX

May
8, 1996

XXXXX

Re: Advisory opinion - Application of sales tax
to sales of brochures, newsletters, advertisements and other graphic products

Dear
XXXXX

We
have received your request for an opinion as to the tax status of the products
sold by XXXXX. From the description provided
in your request, we are not sure whether you merely design graphics for use by
a printer, or if you actually produce and sell the final printed product. However, we offer the following guidance:

Charges to design web page graphics
are not subject to tax at this time.
However, we want to let you know that the legislature is conducting a
telecommunications study to reevaluate the tax status of on-line services,
among other issues. At the conclusion
of the study, the legislature may enact changes to our tax laws that impact
this service. Of course, we will issue
bulletins as these issues developed to keep you informed.

Sales of business cards,
newsletters, brochures or other printed material to your customers are
taxable. All services in connection
with the sale of the printed material are also taxable. Therefore, if you are
selling graphic artwork or a final printed product to your client, the entire
charge -- including the charge for design services -- is taxable. There are three exceptions to this rule:

1. If
   your customer is purchasing the printed material for resale, the transaction
   between you and the retailer is exempt.
   It is the retailer who must collect tax on the sale to the final
   customer. However, if you sell the
   retailer any materials that will not be resold, you must collect sales tax on
   those items. The following examples
   will illustrate this point:

a. Assume that you design a �master� of
some artwork and sell it in printed form or on disk or CD to your
customer. Your customer, in turn, uses
the master to reproduce thousands of
copies for sale. In this case,
the sale of the master is taxable because the master itself is not resold.

b.
Assume that you design a booklet
using desktop publishing software and print and sell 1000 copies to your customer.
The customer, in turn, resells the 1000 copies. In this case, the transaction between you
and your customer is an exempt sale for resale. You must obtain a resale exemption certificate from your customer
and keep it with your tax records.

If you sell both the master and the
copies intended for resale, your customer must pay sales tax on the master and
any other items that are not resold.
Charges for copies made for resale are not taxable so long as the
non-taxable charges are separately stated on the bill or invoice.

2. The second exception arises if you
   deliver or ship the printed material out of state as a condition of the
   sale. For instance, if your customer is
   in Nevada, and you either deliver the finished product to Nevada yourself or
   ship it by common carrier, the sale is exempt from Utah sales tax.

3. Finally we recognize an exception for
   printed artwork produced and delivered for distribution as newspaper
   inserts. Under Utah Administrative Rule
   R865-19S-65, sales of newspapers are not taxable, so sales of newspaper inserts
   are not taxable.

Because you sometimes provide
services in conjunction with a printer or typesetter, you should know that typesetters,
artists and other vendors who furnish materials to the printer who sells the
final product are required to collect tax unless the printer furnishes them a
resale exemption certificate. If your
customer contracts with a printer to print 1000 brochures, the printer may
purchase graphics design work directly from you tax free by furnishing you with
a resale exemption certificate. On the
other hand, if you are selling the final product, you may purchase typesetting
and printing services tax free if you furnish the typesetter or printer with a
resale exemption certificate. In both
of these cases, the sales transaction is between you and another vendor who is
supplying some component part of the final product. However, if the customer purchases these items individually from
each vendor, sales tax applies to each transaction.

Although you asked for information
regarding sales to your customers, this is a good opportunity to point out that
you may purchase certain materials and supplies tax free for resale if those
materials become a component part of finished taxable product. For instance, you may purchase paper tax
free if it is used as part of the final product which is taxable to your
customer. You are required to pay sales
tax on the items that you consume in the design or production process. That is, you must pay sales tax when you
purchase an item for use in your business if that item does not become a
component part of the final product.
For example, if you purchase non-custom software, such as desktop
publishing software, for use in producing the final product, you must pay sales
tax on that purchase at the point of sale.

If you have any further questions,
please let us know.

For
the Commission,

Alice
Shearer,

Commissioner

April
19, 1996 Advisory Opinion
Request

May
8, 1996 Response from the
Tax Commission

Hello
XXXXX!

Thanks
for your help to date. We spoke on the phone earlier in the week regarding my
sending you e-mail describing my business activities in order to determine
sales tax exemption status.

Here's
a brief description of my business, XXXXX, Account No. XXXXX.

I
am a graphic designer working from home. I create sales brochures, newsletters,
advertisements, direct mail pieces, trade show graphics, signs, business cards
stationery, etc. for my clients. I also design and maintain World Wide Web
pages on the Internet for clients. All of the materials produced are used by
the client as marketing tools for their products.

The
client will typically provide me with some concept of what they are trying to
achieve and/or provide me with rough text and graphics. I then design the
layout or artwork on a computer.

If
any typesetting is required, I deliver the files by modem or disk to the typesetter
who then bills the client directly for the film produced. The film from the
typesetter is delivered by myself or the client to the printer who produces the
printed piece and then bills the client directly

for
the printing.

I
then bill the client for my time on a hourly basis, with no markup for
typesetting or printing costs, since the client is billed directly by the
printer and typesetter. I charge by the hour for my time reviewing pre-press
film and performing press checks at the printer. It's all pretty

straightforward.

Please
advise me as to your determination by return e-mail in addition to the official
letter, or e-mail me if you need further information.

Hope
I'm not too late to still be the first to request a determination over the Internet!

Thanks
again.

Regards,

XXXXX

XXXXX

Re: Advisory opinion - Application of sales tax
to sales of brochures, newsletters, advertisements and other graphic products

Dear
XXXXX

We
have received your request for an opinion as to the tax status of the products
sold by XXXXX. From the description
provided in your request, we are not sure whether you merely design graphics
for use by a printer, or if you actually produce and sell the final printed
product. However, we offer the following
guidance:

Charges to design web page graphics
are not subject to tax at this time.
However, we want to let you know that the legislature is conducting a
telecommunications study to reevaluate the tax status of on-line services,
among other issues. At the conclusion
of the study, the legislature may enact changes to our tax laws that impact
this service. Of course, we will issue
bulletins as these issues developed to keep you informed.

Sales of business cards, newsletters,
brochures or other printed material to your customers are taxable. All services in connection with the sale of
the printed material are also taxable. Therefore, if you are selling graphic
artwork or a final printed product to your client, the entire charge --
including the charge for design services -- is taxable. There are three exceptions to this rule:

1. If
   your customer is purchasing the printed material for resale, the transaction
   between you and the retailer is exempt.
   It is the retailer who must collect tax on the sale to the final
   customer. However, if you sell the
   retailer any materials that will not be resold, you must collect sales tax on
   those items. The following examples
   will illustrate this point:

a. Assume that you design a �master� of
some artwork and sell it in printed form or on disk or CD to your
customer. Your customer, in turn, uses
the master to reproduce thousands of
copies for sale. In this case,
the sale of the master is taxable because the master itself is not resold.

b.
Assume that you design a booklet
using desktop publishing software and print and sell 1000 copies to your customer.
The customer, in turn, resells the 1000 copies. In this case, the transaction between you
and your customer is an exempt sale for resale. You must obtain a resale exemption certificate from your customer
and keep it with your tax records.

If you sell both the master and the
copies intended for resale, your customer must pay sales tax on the master and
any other items that are not resold.
Charges for copies made for resale are not taxable so long as the
non-taxable charges are separately stated on the bill or invoice.

2. The second exception arises if you
   deliver or ship the printed material out of state as a condition of the
   sale. For instance, if your customer is
   in Nevada, and you either deliver the finished product to Nevada yourself or
   ship it by common carrier, the sale is exempt from Utah sales tax.

3. Finally we recognize an exception for
   printed artwork produced and delivered for distribution as newspaper
   inserts. Under Utah Administrative Rule
   R865-19S-65, sales of newspapers are not taxable, so sales of newspaper inserts
   are not taxable.

Because you sometimes provide
services in conjunction with a printer or typesetter, you should know that
typesetters, artists and other vendors who furnish materials to the printer who
sells the final product are required to collect tax unless the printer
furnishes them a resale exemption certificate.
If your customer contracts with a printer to print 1000 brochures, the
printer may purchase graphics design work directly from you tax free by
furnishing you with a resale exemption certificate. On the other hand, if you are selling the final product, you may
purchase typesetting and printing services tax free if you furnish the
typesetter or printer with a resale exemption certificate. In both of these cases, the sales
transaction is between you and another vendor who is supplying some component
part of the final product. However, if
the customer purchases these items individually from each vendor, sales tax
applies to each transaction.

Although you asked for information
regarding sales to your customers, this is a good opportunity to point out that
you may purchase certain materials and supplies tax free for resale if those
materials become a component part of finished taxable product. For instance, you may purchase paper tax
free if it is used as part of the final product which is taxable to your
customer. You are required to pay sales
tax on the items that you consume in the design or production process. That is, you must pay sales tax when you
purchase an item for use in your business if that item does not become a
component part of the final product.
For example, if you purchase non-custom software, such as desktop
publishing software, for use in producing the final product, you must pay sales
tax on that purchase at the point of sale.

If you have any further questions,
please let us know.

For
the Commission,

Alice
Shearer,

Commissioner