Are recording-studio services, delivery of the master tape, and duplication of customer tapes subject to Kansas sales tax?

Plain-English summary

An audio company asked how Kansas sales tax applied to its recording and duplication work. The Department divided the business into nontaxable studio services and taxable retail tape sales.

Studio recording was not an enumerated taxable service. Giving the client the original master tape was incidental to that service rather than a separate retail sale. The studio did not collect tax from the recording client but had to pay sales tax on everything it purchased to operate the studio.

Duplicating tapes for a client was a taxable retail sale. The studio had to charge tax on the total amount billed for the duplicate tapes.

The Department recommended placing nontaxable recording services and taxable duplication services on separate bills so the business's records clearly identified each category.

What this means for you

Recording studios

Do not collect tax on the standalone recording service or incidental master tape described, but pay tax on your operating purchases.

Duplication businesses

Collect tax on the entire customer charge for duplicated tapes.

Bookkeepers

Keep recording-service receipts separate from duplication sales. Separate invoicing was a recommended recordkeeping practice in the opinion.

Common questions

Q: Are studio recording services taxable?
A: No. They were not an enumerated taxable service.

Q: Is handing over the master tape taxable?
A: No. The Department treated it as incidental to the recording service.

Q: Are duplicate tapes taxable?
A: Yes. Duplication was a retail sale taxable on the total charge.

Q: Should the services appear on separate invoices?
A: The Department recommended separate billing to create clear records.

Citations and references

• Kansas retailers' sales tax act — tangible-property and enumerated-services framework described in the letter; no section number cited

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-2003-002

Original ruling text

Opinion Letter

Body:

Office of Policy & Research

January 28, 2003

XXXX
XXXX
XXXX

RE: Your letter dated January 23, 2003

Dear XXXX:

I have been asked to answer your letter that the department received recently. You operate a recording audio company. You asked how Kansas sales tax should apply to your business.

The Kansas sales tax act taxes sales of tangible personal property and sales of certain enumerated services. Studio recording services are not subject to sales tax. Accordingly, your business must pay sales tax on everything that it buys to operate the recording studio. You would not charge sales tax to clients who use your studio. Transfer of the master tape (original recording) to a client would not be taxed as a retail sale, but would be considered to be part of the non-taxable service.

You will be making retail sales if you duplicate tapes for clients. When duplicating tapes, you must charge the client sales tax on total charge for the tapes that are purchased. As a matter of business practice, I recommend that when you bill a client, that you never bill charges for the nontaxable recording services on the same bill that you use to charge a customer for the taxable duplicating services. This way, your records will clearly identify and separate the non-taxable services from the taxable services.

I hope that I have answered all of your questions. If you have any more, please call me at 785-296-3081 and we can discuss them.

Sincerely,

Thomas E. Hatten
Attorney/Policy & Research

Date Composed: 02/10/2003 Date Modified: 02/10/2003

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