Is sales tax due on the artwork, printing and mailing services for a free company magazine, and does it matter whether copies are mailed by the printer or distributed by the company itself?

Plain-English summary

Carrier Corporation was considering publishing "Carrier World," a magazine of industry articles, sales techniques and dealer profiles that it would circulate free to air-conditioning distributors and dealers worldwide — roughly 10% of them in New York. An advertising agency would set the type and prepare the mechanical artwork, and a printer would buy the paper and color separations, print the magazine, and bill Carrier for the whole job. Carrier asked how sales tax applied to the artwork, printing and distribution, both when the printer mails the copies directly and when Carrier mails them itself.

The Department held the production inputs are taxable, and distribution tax follows the copies' destination.

• No production exemption, because nothing is sold. The § 1115(a)(12) exemption covers machinery and equipment (including artwork, illustrations, layouts and photographs under TSB-M-79(7.1)S) used directly and predominantly to produce tangible personal property for sale. Because "Carrier World" would be given away rather than sold, the exemption doesn't apply, and Carrier must pay tax on all the artwork and related items used to print it.
• Printer ships directly to a mailer: tax only on NY copies. If Carrier instructs the printer to send the printed matter directly to a mailing service, and the mailer tells the printer the in-state and out-of-state destinations, the printer charges tax only on the charges for copies mailed to New York addresses. The mailer's fees are taxed the same way (see Form ST-152).
• Carrier takes possession in NY: all taxable, then refund. If Carrier takes possession of the copies in New York and does the final mailing itself, all the charges are taxable at the state and local rate at Carrier's address — but Carrier may then apply for a refund or credit for the tax paid on copies subsequently mailed outside New York.
• "Periodical" status left open. A tax-exempt periodical under § 1115(a)(5) must meet the tests in 20 NYCRR 528.6(c) (printed at least quarterly, not a book, publicly circulated, continuous in title, varied articles). Because Carrier hadn't finalized the format and content, there weren't enough facts to decide, and Carrier could re-petition once it had.

What this means for you

A giveaway publication doesn't get the manufacturing exemption. The production exemption is only for property you make to sell. If you print a magazine, catalog or newsletter to distribute free, the artwork, plates and printing that go into it are taxable purchases to you — you're the end consumer, not a manufacturer.

Mailer routing changes who pays what. If your printer ships finished copies straight to a mailing house and the destinations are documented, you're only taxed on the New York-bound copies. If you bring the copies into New York first and mail them yourself, you pay tax on everything up front and have to chase a refund for the out-of-state copies. Keep destination records either way — they're what limits or recovers the tax.

"Is it a periodical?" is a fact question — nail down the format first. A publication that qualifies as a periodical under 20 NYCRR 528.6(c) can be exempt under § 1115(a)(5), but the Department won't rule on a publication that doesn't yet exist. If exemption matters to you, finalize the format and content, then ask.

Common questions

Q: We give our magazine away. Can we still buy the artwork and printing tax-free?
A: No. The production exemption applies only to property produced for sale. Because the magazine is given away, the artwork and other production inputs are taxable to you.

Q: Does it matter whether the printer mails the copies or we do?
A: Yes. If the printer ships directly to a mailer with documented destinations, only the New York-bound copies are taxed. If you take possession in New York and mail them yourself, everything is taxed and you claim a refund or credit for the copies later mailed out of state.

Q: Is our magazine a tax-exempt "periodical"?
A: The Department couldn't say, because the format and content weren't finalized. A periodical must meet the tests in 20 NYCRR 528.6(c); you can re-petition once the publication is defined.

Citations and references

Statutes, regulations and authority:

• Tax Law § 1105(a) — tax on retail sales of tangible personal property
• Tax Law § 1115(a)(12) — production machinery/equipment exemption (property produced for sale); § 1115(a)(5) — newspapers and periodicals exemption
• 20 NYCRR 528.6(c) — definition of "periodical"
• TSB-M-79(7.1)S — artwork/illustrations/layouts as exempt production equipment; Form ST-152 — Collection and Reporting Instructions for Printers and Mailers

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1981.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a81_30s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-81 (30) S
Sales Tax
October 5, 1981

STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO. S810401B

On April 1, 1981 a Petition for Advisory Opinion was received from Carrier Corporation,
Carrier Tower, P.O. Box 4800, Syracuse, New York 13221.
The issues raised are whether or not art services, printing services and distribution services
purchased by Petitioner for the purpose of preparing and distributing a publication are subject to tax
under the following conditions: (1) if Petitioner instructs the printer to send the printed matter
directly to a mailing service for distribution to the ultimate reader or; (2) if Petitioner takes
possession of the printed matter in New York State and makes the final distribution to the ultimate
reader.
Petitioner is considering preparing and circulating a publication entitled "Carrier World"
which would be directed to people associated with the air conditioning industry. Every issue would
have articles dealing with research and technical advances made within the industry, sales and
promotional techniques, and biographical sketches of air conditioning dealers and distributors
"success stories". Circulation would be to distributors and dealers worldwide, about ten percent of
which would be in New York State.
Petitioner would supply completed copy and illustrative material to an advertising agency
who would set the type, complete the mechanical artwork and turn these items over to a printer.
Petitioner would furnish the printer with illustrations, additional photographs and retouching
services. The printer would purchase color separations and paper, print the publication and bill
Petitioner for the entire amount.
Section 1105(a) of the Tax Law imposes a tax on: "The receipts from every retail sale of
tangible personal property, except as otherwise provided in this article."
Section 1115(a)(12) of the Tax Law exempts from the tax imposed by Section 1105(a)
"Machinery and equipment for use or consumption directly and predominantly in the production of
tangible personal property . . . for sale, by manufacturing, processing . . .". An exemption from the
tax imposed pursuant to section 1105(a) is also provided for newspapers and periodicals. Tax Law
§1115(a) (5).
Technical Services Bureau Memorandum TSB-M-79(7.1)S, dated May 15, 1980, provides
that artwork, illustrations, layouts, drawings, paintings, mechanicals, overlays, designs, photographs,
and paste-ups will qualify as machinery and equipment and may be purchased tax exempt if used
directly and predominantly (more than 50%) in the printing of tangible personal property for sale.

JAMES H. TULLY., COMMISSIONER
TP-8 (4/80)

LOUIS M. JACOBSON, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR

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TSB-A-81 (30) S
Sales Tax
October 5, 1981

The Collection and Reporting Instructions For Printers and Mailers (Form ST-152) states the
following: "A printer delivering printed or other duplicated advertising matter to a mailer in New
York is required to collect the sales tax on his entire charge unless he is furnished with proof of the
portion of the matter to be mailed to persons outside of New York and the destinations of all of the
matter to be mailed to persons in New York.
A mailer or a printer-mailer is required to collect the statewide and appropriate local sales
taxes on his printing, addressing, and other taxable charges for advertising matter mailed to persons
in New York. The mailer or printer-mailer must maintain records showing the portion of the matter
he mailed to persons outside New York and destinations of all matter mailed to persons in New
York.
The statewide tax and local sales tax at the rate in effect where delivery is made must be
collected on the entire charge where printed or other duplicated advertising matter is delivered to the
customer in New York even if the customer will subsequently send some or all of the matter to
persons outside New York."
Accordingly, because the printed matter will not be sold, the exemption provided by Section
1115(a)(12) of the Tax Law is not applicable. Therefore, Petitioner must pay sales tax on all items
of artwork, etc. which may be purchased for use in printing the proposed publication.
If Petitioner instructs the printer to send the printed matter directly to a mailing service for
distribution to the ultimate reader, and the mailing service informs the printer of the destinations both
within and without New York State to which the mailing is to be sent, the printer may charge
Petitioner sales tax on the charges applicable to the printed matter mailed to addresses within New
York State only. The fees charged by the mailer for its mailing services would be taxed in the same
manner.
If Petitioner takes possession of the printed matter in New York and makes the final
distribution to the ultimate reader, all charges applicable to this printed matter will be subject to the
state and local taxes in effect at Petitioner's address. Petitioner may apply for a refund or credit of
the tax paid on the printed matter subsequently mailed to addresses outside New York State.
The Sales and Use Tax Regulations define a periodical as follows: "In order to constitute a
periodical, a publication must conform generally to the following requirements:
(i)

it must be published in printed or written form at stated intervals, at least as
frequently as four times a year;

(ii)

it must not, either singly or, when successive issues are put together constitute a book;

(iii)

it must be available for circulation to the public;

(iv)

it must have continuity as to title and general nature of content from issue to issue;

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TSB-A-81 (30) S
Sales Tax
October 5, 1981

(v)

each issue must contain a variety of articles by different authors devoted to literature,
the sciences or the arts, news, some special industry, profession, sport or other field
of endeavor." 20 NYCRR 528.6(c).

Petitioner has not completed development of the format and content of the proposed
publication. Therefore, there are insufficient facts upon which to render an opinion as to whether or
not the publication will qualify as a periodical. However, Petitioner may petition for such opinion
and its impact on this opinion when the format and content have been finalized.

DATED: September 18, 1981

s/LOUIS ETLINGER
Deputy Director
Technical Services Bureau