Is the ink-jet addressing equipment a mailing house uses to address envelopes exempt from tax, and does charging sales tax on a single combined bill for printing and mailing services matter?

Plain-English summary

A mailing house that produces advertisements and newsletters for mass mailing — creating the documents, inserting them into envelopes, addressing the envelopes, applying postage, and delivering them to the post office — asked whether its ink-jet addressing equipment qualifies for a sales-tax exemption. It had been charging its client sales tax on the total bill for both the printing and the mailing.

The Comptroller ruled the ink-jet addresser does not qualify for exemption, because that equipment is used to perform a nontaxable mailing service, not to manufacture something for sale. But the ruling also clarified the billing side: the fact that the company charged tax on its whole bill doesn't mean it had to. Charging tax on the full combined bill is only correct if a single, undivided charge is made for both printing and mailing. A charge that is separately stated for addressing items to be mailed is not taxable at all.

What this means for you

Mailing houses and fulfillment companies

The equipment you use to address, insert, or otherwise process mail for a client isn't itself tax-exempt just because the mailing service is nontaxable — you owe tax on your own equipment purchases as the end user. But how you bill your client matters: bundle mailing and taxable printing into one lump-sum charge and the whole thing becomes taxable, while separately stating the mailing/addressing charge keeps that portion out of tax.

Printers who also offer mailing/fulfillment services

If you provide both taxable printing and nontaxable mailing services to the same customer, break the invoice into separate line items for each. A single combined charge pulls the nontaxable mailing service into the taxable base along with the printing.

Accountants and tax professionals

This letter is a compact illustration of Texas's separately-stated-charge rule for mixed taxable/nontaxable transactions: the tax treatment of the bundled charge follows the taxable component unless the nontaxable service is broken out as its own line item.

Common questions

Q: Is equipment used only for mailing services tax-exempt in Texas?
A: No. The ink-jet addresser here didn't qualify for exemption because it's used to provide a nontaxable service (mailing), not to manufacture a product for sale — the business still owes tax on the equipment as the end user.

Q: If mailing services aren't taxable, why would my whole invoice be taxed?
A: Because you billed printing and mailing as one combined, undivided charge. Tax follows the taxable printing portion unless the mailing/addressing charge is separately stated on the invoice.

Q: How do I keep my mailing/addressing charges out of the taxable base?
A: State them as a separate line item on the invoice, distinct from the taxable printing charge.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200006401L

Original ruling text

June 12, 2000

Dear **:

Thank you for your recent letter concerning the taxability of a jet ink
addresser.

Your client produces advertisements and newsletters for mass mailing. Your
client creates the documents, insert them in envelopes, address the envelopes
and apply postage, as well as deliver them to them to the post office. Your
client charges sales tax on the total bill for products and services provided.

Question: Does the ink jet addresser qualify for exemption?

Answer: The ink jet addresser does not qualify for exemption. This equipment is
used in providing a nontaxable mailing service. The fact that your client
charges sales tax on the total bill is irrelevant. Your client is correct to
charge sales tax on the total bill if a single charge is made for the printing
and mail services. A separately stated charge for addressing items to be mailed
is not taxable.

This opinion is based on the facts presented. If there are additional facts,
the opinion may change.

You may call me toll free at 1-800-531-5441, extension 3-4683, if you have any
questions or need more information. My email address is
. You may write to Tax Policy Division, P.O.
Box 13528, Austin, Texas 78711-3825.

Sincerely,

Eddie C. Washington
Tax Policy Divsion