Does an older, non-current comic book issue lose Illinois's sales-tax-free 'newsprint and ink' exemption just because it's not the newest issue?

Plain-English summary

The Illinois Department of Revenue confirmed that comic books don't lose their sales-tax exemption just because they're old news. A retailer that sells comic books, collectibles, role-play gaming supplies, and graphic novels asked the Department to confirm that older, non-current comic book issues -- unsold copies still sitting on the shelf after newer issues came out -- keep Illinois's "newsprint and ink" exemption (86 Ill. Adm. Code 130.1910, 130.2105) as long as they're sold at cover price or a discount to cover price, not at a premium.

The Department agreed. Illinois exempts retail sales of newspapers and magazines from the Retailers' Occupation Tax, and courts and prior rulings have extended that exemption to comic books, crossword-puzzle books, word-search books, and similar publications that are published at least twice a year. The test is whether the title is currently published on that periodic schedule -- not whether the specific issue being sold is the newest one. Per 86 Ill. Adm. Code 130.1910(e)(1), comic books published and sold as current serial publications are exempt as newsprint and ink. Per 130.1910(e)(2), comic books sold as collector's items -- for example, old comics sold at conventions that are no longer current serial publications -- are taxable.

The retailer was already collecting sales tax only on comics sold at a premium over cover price (treating those as collectibles), and charging no tax on new or older comics sold at or below cover price. The Department told the retailer: "it appears that you are taxing the various sales of your comic books correctly." In other words, the retailer's existing practice was confirmed as correct.

What this means for you

Comic book and magazine retailers

If you sell comic books, magazines, or similar serial publications, the exemption follows the title, not the individual issue. As long as the title is currently published at least twice a year, older unsold copies still on your shelf remain exempt from Illinois sales tax when sold at cover price or a discount to cover price. You don't need to track how "current" a particular copy is -- only whether it's being sold as ordinary newsprint and ink (at or below cover price) or as a collector's item (at a premium).

Collectibles-shop owners

The moment you sell a comic book (or similar publication) at a premium above cover price because of its rarity or demand, it's treated as a taxable collector's item under 86 Ill. Adm. Code 130.1910(e)(2) -- regardless of whether it's an old or recent issue. The classic example in the regulation is old comics sold at conventions that are no longer current serial publications. If your shop mixes ordinary back-issue sales with premium collectible sales, you need to separately track and tax the premium sales.

Accountants and tax preparers

When advising retailers who sell serial publications, apply a two-part test: (1) is the title currently published at least twice a year (the "newsprint and ink" test under 130.2105 and 130.1910), and (2) is this particular sale at or below cover price, or at a premium reflecting collectible value? Only sales meeting the second condition as a premium sale are taxable under 130.1910(e)(2). This PLR is binding only on the requesting taxpayer and only for 10 years from its issue date, per 2 Ill. Adm. Code 1200.110(e), but it illustrates how the Department applies the exemption to non-current issues generally.

Common questions

Q: Does a comic book stop being tax-exempt once a newer issue comes out?
A: No. The exemption doesn't turn on whether an issue is the newest one. As long as the title is currently published at least twice a year and this copy is sold at or below cover price, it remains exempt as newsprint and ink.

Q: What makes a comic book sale taxable?
A: Selling it as a collector's item -- that is, at a premium above cover price because of rarity or demand -- makes that sale subject to Retailers' Occupation Tax under 86 Ill. Adm. Code 130.1910(e)(2), whether the comic is old or new.

Q: Does this apply to other publications besides comic books?
A: The ruling notes that courts and prior letter rulings have extended the newsprint-and-ink exemption to crossword-puzzle books, word-search books, and other publications issued at least biannually, in addition to comic books and standard magazines/newspapers.

Q: Can other retailers rely on this ruling?
A: No. This is a Private Letter Ruling binding on the Department only as to the specific taxpayer who requested it, and only to the extent the facts given were correct and complete. It expires 10 years after its issue date under 2 Ill. Adm. Code 1200.110(e). Other retailers can look to it as an illustration of the Department's reasoning but cannot rely on it directly.

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2019.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2019/st19-0001-plr.pdf

Original ruling text

ST 19-0001-PLR 01/10/2019 SALE AT RETAIL
The sale of comic books which are published at least bi-annually is exempt from Retailers
Occupation Tax under the newsprint and ink exemption. However, a comic book sold as a
collector item rather than as newsprint and ink in its initial sale, will be subject to Retailers'
Occupation Tax based upon the gross receipts from the sale. See 86 Ill. Adm. Code
130.1910. (This is a PLR.)
January 10, 2019
Re: Taxpayer ID ### - Private Letter Ruling Request – COMPANY
Dear Xxxx
This letter is in response to your letter received November 13, 2018, in which you requested
information. The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are
issued by the Department in response to specific taxpayer inquiries concerning the application of a
tax statute or rule to a particular fact situation. A PLR is binding on the Department, but only as to the
taxpayer who is the subject of the request for ruling and only to the extent the facts recited in the PLR
are correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in
the Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information
Letter (“GIL”) is to direct taxpayers to Department regulations or other sources of information
regarding the topic about which they have inquired. A GIL is not a statement of Department policy
and is not binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website
at www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to
your inquiry.
Review of your request disclosed that all the information described in paragraphs 1 through 8
of Section 1200.110 appears to be contained in your request. This Private Letter Ruling will bind the
Department only with respect to COMPANY, for the issue or issues presented in this ruling, and is
subject to the provisions of subsection (e) of Section 1200.110 governing expiration of Private Letter
Rulings. Issuance of this ruling is conditioned upon the understanding that neither COMPANY, nor a
related taxpayer is currently under audit or involved in litigation concerning the issues that are the
subject of this ruling request. In your letter you have stated and made inquiry as follows:
STATEMENT OF FACTS
COMPANY (“Taxpayer”) is a retailer engaged in the sale of comic books, collectables,
role-play gaming supplies, hard cover graphic novels and other miscellaneous items. A
significant percentage of its sales relates to comic books which are published
periodically.
Unlike other magazines and newspapers, unsold comic books are non-returnable and
so are held and later sold at market value which is either cover price, discount to cover
price or premium to cover price. There are literally thousands of comic books in
inventory at any one time and other than the weekly (‘new”) comic books, they are
carried in inventory based on their weighted average cost.

ST 19-0001-PLR
Page 2
Retailer’s [sic] occupation tax (“Sales Tax”) is not collected on new comic books or on
older comic books sold at either cover price or discount to cover price. Sales Tax is
collected on comic books sold at a premium to cover price.
ISSUE
It was suggested by the District 4 Revenue Collection Officer that Taxpayer request a
private letter ruling regarding the duty of Taxpayer to collect Sales Tax on comic books
that are older than the current editions but not sold at a premium to cover price.
The above issue regards calendar years 2016 to present. To the best knowledge of
Taxpayer the Department has not previously ruled on the same or a similar issue for the
Taxpayer or a predecessor.
APPLICABLE LAW
The sale of comic books are generally covered under the Newsprint Exception Title 86
Part 130 Section 130.2106(a);
Sales of newspapers and magazines are not subject to the tax because of
the newsprint and ink exemption In determining whether a publication
qualifies as a magazine for the purpose of the newsprint and ink
exemption, there is one test that must be met and several other factors to
be considered. The test that must be met for a publication to qualify as a
magazine is that it must be published periodically in the form of newsprint
and ink. Periodically means at least two times per year.
The other factors to be considered are whether a member of the public
can subscribe to the publication, whether the publication is one that has
the basic format of a magazine, including soft covers, individual pages and
indexed articles, whether it contains articles and items that have value to
the general public, and whether it contains general advertising. A
publication has one or more of these characteristics would be considered
to be a magazine, assuming the initial test of periodic publication is met.
Further, Illinois Department of Revenue Regulations, Title 86 Part 130 Section
130.1910(e)(l) specifically includes comic books under the newsprint exception. “Comic
books that are published and sold as current serial publications are exempt from
Retailers’ Occupation Tax as newsprint and ink.”
However, pursuant to Title 86 Part 130 Section 130.1910(e)(2);
Comic books sold as collectors’ items rather than as newsprint and ink are
subject to Retailers’ Occupation Tax. For example, old comic books sold
at conventions that are not current serial publications are subject to tax.
Taxpayer has found no authorities relevant to this issue other than identified above.

ST 19-0001-PLR
Page 3

ARGUMENT
It is industry practice not just for comic book retailers but for retailers of other magazines
and newspapers to apply the newsprint exception to all current publications. It is also
industry practice, where older publications are sold (before they are returned for credit)
to apply the newsprint exception to those older publications. There is no discernable
methodology for Sales Tax purposes to distinguish between current and older
publications sold off the rack for cover price.
A collectible is an item that is worth more than it was originally sold for because of its
rarity and/or popular demand. While that definition can certainly apply to some comic
books or, for that matter, to other magazines; it is not necessarily analogous to whether
the issue is current.
While uncommon, it is not unprecedented that a current issue will immediately increase
in value due to popularity or reduced print run. Older issues [after the current issue] are
kept on the rack not because they are collectable but because they are part of serial
stories and are not time sensitive to customers. They maintain the same utility as
current issues.
Of the factors to be considered pursuant to the Newsprint Exception, none of those
factors regard the age of the publication. In fact, since the exception specifically
applies to publications that are published at least two times a year, a magazine can sit
on the rack for six months and be allowed applicability to the Newsprint Exception.
The example in Regulation Title 86 Part 130 Section 130.1910(e)(2) specifically
excludes from the Newsprint Exemption “Comic books sold as collectors’ items rather
than a newsprint and ink.” Unsold comic books on the rack are not sold as collectables,
but rather as newsprint and ink at their cover price. As previously stated, where comic
books become collectable and sell at a premium; whether current or older, Taxpayer
collects Sales Tax on the sale.
CONCLUSION
Taxpayer respectfully requests a private letter ruling that comic books which are
superseded by current issues, but which continue to be sold at cover price, or at a
discount from the cover price, be subject to the Newsprint Exception to Retailer’s [sic]
Occupation Tax under Title 86 Part 130 Section 130.2106(a).
DEPARTMENT’S RESPONSE:
The Retailers' Occupation Tax Act imposes a tax upon persons engaged in this State in the
business of selling tangible personal property at retail to purchasers for use or consumption. See 86
Ill. Adm. Code 130.101. Use Tax is imposed on the privilege of using, in this State, any kind of
tangible personal property that is purchased anywhere at retail from a retailer. See 86 Ill. Adm. Code
150.101. These taxes comprise what is commonly known as “sales tax” in Illinois.

ST 19-0001-PLR
Page 4

Retailers who engage in retail sales of newspapers and magazines incur no Retailers'
Occupation Tax liability. See 86 Ill. Adm. Code 130.2105. Court cases and letter rulings have
interpreted this regulation to include comic books, crossword puzzle books, word search books, and
other publications which are issued at least biannually. As long as the comic books that you are
selling are currently published at least twice a year, you will not incur Retailers' Occupation Tax
liability on the retail sale of the comic books. In contrast, however, comic books sold as collector
items will be subject to Retailers' Occupation Tax based upon the gross receipts from the sale. See
86 Ill. Adm. Code 130.1910.
Based upon the information in your letter, it appears that you are taxing the various sales of
your comic books correctly.
The factual representations upon which this ruling is based are subject to review by the
Department during the course of any audit, investigation, or hearing and this ruling shall bind the
Department only if the factual representations recited in this ruling are correct and complete. This
Private Letter Ruling is revoked and will cease to bind the Department 10 years after the date of this
letter under the provisions of 2 Ill. Adm. Code 1200.110(e) or earlier if there is a pertinent change in
statutory law, case law, rules or in the factual representations recited in this ruling.
I hope this information is helpful. If you have further questions concerning this Private Letter
Ruling, you may contact me at (217) 782-2844. If you have further questions related to the Illinois
sales tax laws, please visit our website at www.tax.illinois.gov or contact the Department’s Taxpayer
Information Division at (217) 782-3336.
Very truly yours,

Richard S. Wolters
Chairman, Private Letter Ruling Committee
RSW:DMB:bkl