Were sales of printed coupon booklets taxable in Utah, and who owed tax on the materials and printing used to produce them?

Plain-English summary

Utah Private Letter Ruling 97-066 said sales of the described coupon booklets were not taxable.

The Commission's answer assumed that the company only published the booklets and did not also sell the products or services advertised in them.

Tax still applied at the production stage. The printer, publisher, advertiser, or vendor had to pay sales tax on Utah costs for materials or printing used to make the booklets.

Coupon-booklet business

The advertising company arranged the design, printing, and distribution of coupon booklets.

Each booklet contained pages described as mini-billboards for local businesses. The coupons identified a merchant and offered a free or reduced-price service or product when presented.

The company sold the finished coupon booklets to the public.

Requester's position

The request cited Utah Sales and Use Tax Policy Notice 81-3.

It argued that buyers sought the intangible discount rights represented by the coupons rather than the physical booklet itself.

The Commission's short response did not adopt or discuss that reasoning in detail. It simply stated the tax result and its key factual assumption.

Booklet sales were not taxable

For purposes of the opinion, the Commission assumed that the company only published coupon booklets.

It also assumed the company was not a vendor of the advertised products.

On those facts, the Commission did not consider the sale of coupon booklets taxable.

Production costs were taxable

The no-tax treatment for the booklet sale did not make production inputs exempt.

The Commission said the printer, publisher, advertiser, or vendor had to pay sales tax on costs incurred in Utah to:

• Purchase booklet materials.
• Print the booklets.

The response did not allocate responsibility among those parties beyond stating that the applicable party had to pay the tax.

Holding

Under the stated assumption:

• Sales of the coupon booklets were not taxable.
• The publisher could not also be the vendor of the advertised products for the stated assumption to hold.
• Utah material-purchase and booklet-printing costs remained taxable to the printer, publisher, advertiser, or vendor.

What this means for you

Coupon-book and local-marketing publishers

The tax treatment of the finished booklet did not eliminate tax on producing it.

Advertisers and printers

Identify which party buys the paper, printing, and other production inputs and whether those costs arise in Utah.

Fundraising organizations and accountants

Do not assume every coupon-book arrangement fits this ruling. Merchant sales, commissions, fundraising transfers, digital delivery, and bundled products can change the analysis.

Common questions

Q: Were sales of the coupon booklets taxable?

A: No, on the stated facts.

Q: What assumption mattered?

A: The company only published the booklets and did not also sell the advertised products.

Q: Were the booklet's materials and printing exempt?

A: No. Tax applied to Utah costs for purchasing materials or printing.

Q: Did the Commission explain the intangible-right theory in detail?

A: No. That reasoning appeared in the request; the response gave a short conclusion.

Q: Did the ruling decide how merchants should tax coupon redemptions?

A: No. The response addressed the booklet sale and production costs.

Key source language

• Assumption: “we assume that COMPANY A only publishes the coupon booklets and that it is not also a vendor of the products advertised.”
• Booklet sale: “The Tax Commission does not consider the sale of coupon booklets to be taxable.”
• Production costs: “the printer, publisher, advertiser or vendor must pay sales tax on its costs incurred in Utah to purchase materials or print the booklets.”

Citations and references

• Utah Sales and Use Tax Policy Notice 81-3, cited in the request

Source

• Landing page: Utah Private Letter Rulings
• Official ruling: Utah PLR 97-066
• Reasoning note: the intangible-discount-right explanation appears in the request, while the Commission's response states the result without adopting that analysis.
• Fetch note: the exact official URL returned HTTP 404 to a direct request and was then retrieved through Sofya.

Original ruling text

97-066

Response November 18, 1997

REQUEST LETTER

October 20, 1997

Re: Request for Advising Opinion

Dear Ms. Rees:

Please consider this a request for an advisory opinion. I represent COMPANY A (�COMPANY A�) which has just received a Utah tax number for sales and withholding and is about to conduct business in the state of Utah. COMPANY A is in the advertising business. Its clients are businesses interested in participating in a local advertising campaign through the medium of a coupon booklet. The coupon booklet consists of various pages which are called �mini-billboards� which advertise the name of a particular business and the services and/or products it sales. Each �mini-billboard� is in the form of a coupon which displays the name and address of the local business and also contains an inducement to visit the business. The inducement takes the form of an offer to perform some service for free (or at a reduced rate) or to provide some products or goods for free (or at a reduced price) upon presentment of the coupon. The individual coupons are bound together in the form of a booklet.

COMPANY A arranges for the design of the advertisements, the printing, and the distribution of the �coupon booklets.� COMPANY A then sells the coupon booklets to the public for a price.

We would like to clarify the status of the sale of these coupon booklets to the public for

purposes of the Utah sales and use tax. It would appear that the matter is covered by Sales and

Use Tax Policy Notice #81-3 which provides, in part: �Some promoters put together coupon

books that offer discounts for various businesses (i.e. Happening Books) for sale and distribution

to the general public. These promoters or advertisers should pay tax on their printing costs of

the actual coupon book. The sale of the coupon book by the promoter or some organization is

not considered the sale of tangible personal property and is not subject to the sales tax. When

the participating merchants honor the coupons, sales tax should be determined as previously

explained." (Copy attached for reference as Exhibit �A�).

Idaho has a sales and use tax structure which is similar to that of Utah. The State Tax Commission of Idaho has ruled that the sale of these coupon booklets is not the sale of tangible

personal property because: �individuals who purchased COMPANY A's coupon books do not

seek the books themselves as the object of the transaction. Instead, they seek the intangible right

to obtain the advertisers product or service at the discount provided or, if provided in the coupon, for free. For this reason, the purchase of the books is not the purchase of tangible personal property under the general provision of Idaho Code Section 63-3612.� Idaho State Tax

Commission Declaratory Ruling, Docket No. 11622 at page 3. A copy of the Declaratory Ruling is attached for your reference.

It is our belief that under Utah law the sale of the coupon books is not subject to Utah

sales tax. We request that you confirm that the sale of the coupon books in the state of Utah by

COMPANY A does not give rise to Utah sales or use tax. If you require any additional

information, please contact me at your earliest convenience. We look forward to receipt of your

advisory opinion.

Yours truly,

NAME

RESPONSE LETTER

November 18, 1997

NAME

ADDRESS

CITY STATE ZIP

Advisory Opinion - Application of sales tax to sales of coupon booklets.

Dear NAME,

We have received your request for sales tax guidance pertaining to the sales of coupon booklets. For purposes of this opinion, we assume that COMPANY A only publishes the coupon booklets and that it is not also a vendor of the products advertised. We offer the following guidance:

The Tax Commission does not consider the sale of coupon booklets to be taxable. However, the printer, publisher, advertiser or vendor must pay sales tax on its costs incurred in Utah to purchase materials or print the booklets.

Please let us know if you have additional questions.

For the Commission,

Joe B. Pacheco,

Commissioner

^^