Are advertising catalogs given to customers free of charge subject to Kansas sales or use tax, and does Kansas exempt periodicals?

Plain-English summary

A retail company has industry-specific catalogs printed roughly every six weeks and distributes them to retail customers free of charge. It asked the Department whether Kansas offers any periodical exemption and, if the catalogs are taxable, how the tax is calculated. The Department's answer: Kansas has no periodical exemption, and the catalogs are taxable.

No periodical exemption. The Department stated plainly that "Kansas does not exempt periodicals from sales or compensating (use) taxes." Printed matter of this kind is treated as taxable tangible personal property.

Sales tax or use tax — depending on where the printing happens. The Department drew the usual in-state/out-of-state line:

• If the catalogs are printed outside Kansas and shipped to a Kansas address, the company is responsible for use tax.
• If they are printed in Kansas and delivered to a Kansas address, sales tax is due on the sale.

The tax base is the printer's total charge. The Department said the tax is measured by "the printer's charges to your company including any shipping or delivery charges" — not a reduced or percentage figure. And the method of delivery has no impact on taxability.

The regulation behind it. The Department pointed to K.A.R. 92-19-12, which treats newspapers, magazines, periodicals, trade journals, publications, and other printed matter as taxable tangible personal property. Two parts are especially relevant to free-distribution catalogs:

• subsection (c): when publications are distributed free of charge, the person printing or publishing them for sale to the distributor "is deemed to be the seller thereof and must collect the tax."
• subsection (d): a person who prints or produces free-distribution publications is treated as the final user or consumer of the materials and pays sales tax on the materials used to produce them (with a special mechanism for a printer who produces both items for sale and items given away free).

Bottom line: giving catalogs away does not make them tax-free. Someone pays Kansas tax on the printing — the company owes use tax on out-of-state printing shipped in, or sales tax on in-state printing, measured by the printer's full charge including freight.

What this means for you

Businesses that give away printed marketing

Free catalogs, circulars, and advertising pamphlets are taxable printed matter in Kansas — there is no periodical exemption to fall back on. Expect to pay tax on the cost of producing them; the giveaway is a taxable consumption, not an exempt sale.

Know whether you owe sales tax or use tax

Where the printing happens controls the label. In-state printing → the printer charges you sales tax on the sale. Out-of-state printing shipped into Kansas → you self-assess use tax. Either way the measure is the printer's full charge, including shipping and delivery.

Printers of free-distribution matter

Under K.A.R. 92-19-12(c)-(d), if you print publications that are distributed free of charge, you are generally deemed the seller/consumer and are responsible for the tax on the materials or the sale. A printer who produces both resale items and free-distribution items should follow the regulation's specific mechanism for reporting and taxing the exempt materials it consumes.

Common questions

Q: Does Kansas have a sales-tax exemption for periodicals?
A: No. The Department stated that Kansas does not exempt periodicals from sales or compensating (use) taxes.

Q: Are catalogs taxable even though customers get them free?
A: Yes. They are taxable tangible personal property. Distributing them free of charge does not remove the tax; the company owes tax on the printing.

Q: Is it sales tax or use tax?
A: Use tax if the catalogs are printed outside Kansas and shipped to a Kansas address; sales tax if they are printed and delivered in Kansas.

Q: What is the tax based on?
A: The printer's charges to the company, including any shipping or delivery charges. The method of delivery does not change the result.

Citations and references

• K.A.R. 92-19-12 — treats newspapers, magazines, periodicals, trade journals, publications, and other printed matter as taxable tangible personal property; subsection (c) deems the printer/publisher of free-distribution publications the seller who must collect the tax, and subsection (d) treats such a printer as the final consumer of the materials used.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2001-127

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

November 9, 2001

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Dear Sirs:

The purpose of this letter is to respond to your letter dated September 21, 2001.

In your letter you stated:

I would like some advice on the taxability of publications in your state.

I understand that some states have exemptions for specific types of publications. I would like to know if your state has any exemptions that we may claim for the publications in question, as detailed below.

A retail company has catalogs printed that are industry specific, and for informational purposes only. The catalogs are printed approximately every six weeks, and are then delivered to various retail locations throughout the state. The catalogs are available to retail customers free of charge.

Your letter continues with a series of questions:

Do the catalogs qualify as periodicals, and if so, is there a periodical exemption available in your state?

Answer: Kansas does not exempt periodicals from sales or compensating (use) taxes.

Is the retail company that had the catalogs printed responsible for use tax?

Answer: Yes, this assumes the catalogs are printed outside of Kansas and shipped to a Kansas address. If the catalogs were printed in Kansas and delivered to a Kansas address, then sales tax would be due on the sale.

If the answer to the above question is yes, is the tax calculated on the actual printing cost, or is the taxable base calculated using another method, such as a percentage of the cost?

Answer: The tax base is the printer’s charges to your company including any shipping or delivery charges.

Does the method of delivery have any impact on the taxability of these catalogs?

Answer: No.

If you can, please provide statutes, regulations or citations in your law so that I may have documentation for my files.

The following Kansas Administrative Regulation is on point.

92-19-12 Newspapers, magazines, periodicals, trade journals, publications and other printed matter.

(a) Newspapers, magazines, periodicals, trade journals, publications and other printed matter are tangible personal property and the receipts from retail sale of these items are taxable.

(b) When subscriptions for newspapers, magazines, periodicals, trade journals, publications and other printed matter are taken within the state of Kansas, sent to a printer or publishing house outside Kansas and the publication is thereafter mailed to the subscriber within Kansas, the receipts from the subscriptions are taxable.

(c) When newspapers, trade publications, advertising pamphlets, circulars and other publications, are distributed free of charge, the person printing or publishing the publication for sale to the distributor is deemed to be the seller thereof and must collect the tax.

(d) Each person who prints or produces and distributes publications, free of charge, is regarded as the final user or consumer of all materials used to print or produce the publication. For tax purposes, the printer or publisher shall pay sales tax on all purchases of materials used to print or produce the publication. If a person prints or publishes tangible personal property for sale to consumers, and also prints or publishes publications which are distributed free of charge, a person may purchase all materials used in the printing and publishing process exempt from sales tax. When a person prints or publishes the publication for distribution free of charge, that person shall include the cost of all exempt materials purchased for use in printing or producing that publication on the sales tax return and impose sales tax on that amount. (Authorized by K.S.A. 79-3618, K.S.A. 1986 Supp. 79-3602, 79-3603 as amended by L. 1987, Ch. 182, Sec. 108, 79-3606, as amended by L. 1987, Ch. 64, Sec. 1; effective, E-70-33, July 1, 1970; effective, E-71-
8, Jan. 1, 1971; effective Jan. 1, 1972; amended May 1, 1988.)

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

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 11/09/2001 Date Modified: 11/09/2001

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