A typesetter sells imprinted film used to print catalogs. Is that a taxable sale of property or an exempt typesetting service?

Plain-English summary

Stibo Datagraphics Inc. is a commercial typesetter that produces imprinted film — the film a printer uses to make printed catalogs. It sells the film directly to its customers (not to the printer) and argued it is selling a typesetting service, not tangible personal property.

The Department held the film is taxable tangible personal property — the sale is taxable unless the buyer certifies an exempt use.

• The film is tangible personal property. Under § 1101(b)(6), tangible personal property is corporeal personal property of any nature. The imprinted film is such property, so when Stibo sells the film it is selling tangible personal property, not "merely selling its typesetting service."
• Sales are presumed taxable. Under § 1132(c), receipts from all sales of tangible personal property are presumed taxable until the contrary is established. Stibo supplied nothing showing the film would be used for an exempt purpose.
• An exempt-use certificate can change it. If the customer uses the film to produce catalogs it then sells, the film is used in production for resale and can be exempt — but only if the customer gives Stibo a properly completed Exempt Use Certificate (Form ST-121). (Compare TSB-M-79(7.1)S Example 1: typography for an annual report not produced for sale is taxable.)
• Bottom line. Without a proper exemption certificate, the sale of the film is taxable.

What this means for you

Handing over a physical product makes it a property sale — even when skilled work went into it. If your "service" is delivered as a tangible item the customer buys (film, plates, a physical master), New York generally treats it as a taxable sale of property, not an untaxed service. The labor behind it doesn't remove the tax.

Get the exemption certificate up front. The sale is presumed taxable. If your customer will use the product to make something they sell (like catalogs for sale), collect a properly completed Exempt Use Certificate (ST-121) — that, not your own characterization of the work, is what supports exempt treatment.

Watch the "produced for sale" line. Prepress output used to make a product the buyer sells can be exempt; the same output used for the buyer's own non-resale materials (an annual report, internal use) is taxable. The end use drives it.

Common questions

Q: I sell typeset film, not a physical "product." Is it still taxable?
A: Yes. The film is tangible personal property, so selling it is a taxable sale — even though it embodies your typesetting work — unless the buyer gives a valid exemption certificate.

Q: My customer uses the film to print catalogs they sell. Is that exempt?
A: It can be, because the film is used in production for resale. But you must obtain a properly completed Exempt Use Certificate (Form ST-121) from the customer.

Q: What if the customer uses it for a non-resale project?
A: Then it's taxable — like typography used for an annual report that isn't produced for sale.

Citations and references

Statutes and guidance:

• Tax Law § 1105(a) — taxes retail sales of tangible personal property
• Tax Law § 1101(b)(6) — defines tangible personal property
• Tax Law § 1132(c) — presumption that sales of tangible personal property are taxable
• TSB-M-79(7.1)S — typography Example 1 (used for a report not produced for sale is taxable)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1987.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a87_19s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-87(19)S
Sales Tax
May 5, 1987

Taxpayer Services Division
Technical Services Bureau
STATE OF NEW YORK
STATE TAX COMMISSION
ADVISORY OPINION

PETITION NO: S861121A

On November 21, 1986, a Petition for Advisory Opinion was received from Stibo
Datagraphics Inc., 400 Franklin Road, Marietta, Georgia 30067.
The issue raised is whether Petitioner's sales of imprinted film which is used to print catalogs
is subject to sales tax.
Petitioner is a commercial typesetter that specializes in computerized typesetting with detail
graphics. The primary use of Petitioner's service is in preparing and maintaining catalogs or the like
for customers. Printed material and graphics are typically entered via keyboard and, using
proprietary software, efficiently organized to suit the customer's preference. Once complete, an
imprinted film is produced for use by a printer in making printed copies. However, all sales are
made directly to the customer, not to the printer.
Petitioner asserts that it is selling a typesetting service to its customers and not tangible
personal property. It is uncertain as to the intended results of the following example from Technical
Services Bureau Memorandum 79(7.1)S.
Example 1.

An advertising agency purchases typography. The
typography is to be used in the printing of a client's
annual report. Since the annual report is not being
produced for sale, the typography is subject to the
state and local tax.

Section 1105(a) of the Tax Law imposes a tax on the sale of tangible personal property unless
otherwise exempt. Tangible personal property is defined in Section 1101(b)(6) of the Tax Law and
includes corporeal personal property of any nature.
The film produced by Petitioner is tangible personal property within the meaning of section
1101(b)(6) of the Tax Law. When Petitioner sells film to its customers, it is selling tangible personal
property. It is not merely selling its typesetting service.
Section 1132(c) of the Tax Law provides that it shall be presumed that the receipts from all
sales of tangible personal property are subject to tax until the contrary is established. Petitioner has
supplied no information which would indicate whether the film produced and sold by Petitioner will
be used for exempt purposes by Petitioner's customers. Such would be the case, for instance, if the
film produced by Petitioner is used to produce catalogs which are sold by Petitioner's customers.
In that event, Petitioner's customer would be required to present to Petitioner a properly completed
Exempt Use Certificate (Form ST-121) to establish that such film is exempt from tax.

RODERICK G. W. CHU, COMMISSIONER
GABRIEL B. DiCERBO, DEPUTY COMMISSIONER
FRANK J. PUCCIA, DIRECTOR
TP-8 (3/83)

-2­
TSB-A-87(19)S
Sales Tax
May 5, 1987

Accordingly, the sale of film by Petitioner to its customers is subject to tax unless a customer
presents to Petitioner a properly completed exemption certificate.

DATED: May 5, 1987

s/FRANK J. PUCCIA
Director
Technical Services Bureau

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.