When a printer bills a customer for a finished product, must sales tax be charged on the whole invoice — including the design, copywriting, art direction, and printing costs built into the price?

Plain-English summary

A business that produces printed products for customers asked how Kansas sales tax applies to its invoices, which recover its design, copywriting, art direction, and printing costs. The Department ruled the entire invoice is taxable. (The letter also noted it was correcting a wrong statutory citation given in an earlier letter to the taxpayer.)

The imposition. "K.S.A. 79-3603(a) imposes a sales tax: 'upon the gross receipts received from the sale of tangible personal property at retail within this state.'" The finished printed product is tangible personal property, so its retail sale is taxed on the gross receipts.

Gross receipts = the total selling price. "'Gross receipts' means the total selling price or the amount received as defined in the Kansas Retailers' Sales Tax Act, in money, credits, property or other consideration valued in money from sales at retail within this state." The measure of tax is the whole amount received for the sale, not just the paper and ink.

The holding. "[I]t would be appropriate for the retailer to collect and remit Kansas sales tax on the total invoice amount, which would include recovery of your design, copywriting, art direction and printing related costs, which you incur in order to produce the product for your customer." The creative and production services folded into the price of the product are part of the taxable selling price — the customer is buying a finished tangible product, and the costs of making it do not come out of the tax base.

Bottom line: when the end product is tangible personal property, tax the total invoice. The design, copywriting, art direction, and printing costs that go into producing it are part of the gross receipts subject to Kansas sales tax.

What this means for you

Printers, design shops, and ad producers selling a finished product

If what you deliver is a tangible product (printed pieces, signage, etc.), charge Kansas sales tax on the full invoice. Costs you recover for design, copywriting, art direction, and printing are baked into the taxable selling price; you cannot subtract them from the tax base by itemizing them.

The end product controls

Because the customer is buying tangible personal property, the associated creative and production labor is part of producing that property and is taxed with it. That is different from a standalone service that produces no tangible product — so identify what you are actually delivering.

Itemizing does not reduce the tax

Breaking out design or art-direction charges on the invoice does not exempt them when they are part of the price of a taxable product. The tax base is the total the customer pays for the finished product.

Common questions

Q: Do I charge Kansas sales tax on design and copywriting when I sell printed products?
A: Yes. The Department ruled the total invoice — including recovered design, copywriting, art direction, and printing costs — is subject to sales tax as part of the gross receipts from the sale of the tangible product.

Q: Can I exclude the creative costs by listing them separately?
A: No. Those costs are part of the taxable selling price of the finished product; itemizing them does not remove them from the tax base.

Q: What statute applies?
A: K.S.A. 79-3603(a), which taxes the gross receipts from the retail sale of tangible personal property — the total selling price, including the service costs of producing the product.

Citations and references

• K.S.A. 79-3603(a) — imposes Kansas sales tax on the gross receipts from the sale of tangible personal property at retail. The Department applied it to the printer's total invoice, so the recovered design, copywriting, art direction, and printing costs are part of the taxable selling price.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2000-020

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

April 17, 2000

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Dear Ms. TTTTTTTT:

We wish to acknowledge receipt of your letter dated April 4, 2000, regarding the application of Kansas Retailers’ Sales tax. The statutory site in the letter to you was incorrect. It has been corrected in the body of this letter.

K.S.A. 79-3603(a) imposes a sales tax: "upon the gross receipts received from the sale of tangible personal property at retail within this state."

"Gross receipts" means the total selling price or the amount received as defined in the Kansas Retailers' Sales Tax Act, in money, credits, property or other consideration valued in money from sales at retail within this state.

Please be advised that it would be appropriate for the retailer to collect and remit Kansas sales tax on the total invoice amount, which would include recovery of your design, copywriting, art direction and printing related costs, which you incur in order to produce the product for your customer.

This is a private letter ruling pursuant to K.A.R. 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This ruling will be revoked in the future by the operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or published revenue ruling, that materially effects this private letter ruling.

If I may be of further assistance, please contact me at your earliest convenience at (785) 296-7776.

Sincerely yours,

Thomas P. Browne, Jr.
Tax Specialist

TPB

Date Composed: 10/05/2001 Date Modified: 10/11/2001

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