Does a pagination system — the computer hardware and software a newspaper publisher uses to design and lay out pages before printing — qualify for Texas's manufacturing exemption from sales and use tax?

Plain-English summary

A newspaper publisher/printer asked the Comptroller whether its pagination system — the computer hardware and software used to design, edit, and assemble text and page layouts before the pages are converted to negatives and printing plates — qualifies for Texas's sales and use tax exemption for manufacturing equipment. The Comptroller agreed: the pagination system is exempt manufacturing equipment under Texas Tax Code § 151.318(t), because it is necessary and essential to, and used in connection with, the printing process by a business engaged in printing or imprinting tangible personal property for sale.

What this means for you

Newspaper publishers and commercial printers

Equipment used earlier in your production pipeline — not just the printing press itself — can qualify for the manufacturing exemption if it's necessary and essential to the printing process. Pagination systems (design/layout hardware and software feeding into pre-press negatives and plates) fall within that exemption per this letter.

Print-industry equipment vendors

This letter is a useful reference point if a newspaper or printing customer asks whether pagination hardware/software purchases can be made tax-free with a valid exemption certificate under § 151.318(t).

Accountants and tax professionals

The letter's reasoning tracks § 151.318(t)'s "necessary and essential to... the printing process" standard. It addresses pagination systems specifically; other equipment categories in a print shop (cameras, film, typesetters, plates) would need their own analysis under the same necessary-and-essential test, even though several are named in this letter's subject line.

Common questions

Q: Is a newspaper's pagination system exempt from Texas sales tax?
A: Yes, according to this letter — it qualifies as exempt manufacturing equipment under § 151.318(t).

Q: What test does the Comptroller use to decide if printing-related equipment is exempt?
A: Whether the equipment is necessary and essential to, and used in connection with, the printing process by a person engaged in printing or imprinting tangible personal property for sale.

Q: Does this ruling cover other print-shop equipment like cameras or plates?
A: This particular letter's holding addresses the pagination system specifically. Other equipment would need to independently satisfy the same "necessary and essential" standard under § 151.318(t).

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.318(t) (manufacturing exemption — printing equipment)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200007524L

Original ruling text

July 25, 2000

Dear **:

This is in regards to your letter requesting assistance in determining the
taxability of pagination systems used in the production of daily newspapers.

Pagination systems are a combination of computer hardware and software
specifically designed to allow the printer/publisher to design, edit,
manipulate and assemble text and designs into page layouts for the newspaper.
When the layout is completed the files are sent electronically to the pre-press
area where negatives are produced. The negatives are used to make the plates
used in the printing process.

In accordance with Texas Tax Code Section 151.318(t), we believe that
pagination systems qualify for the exemption from the sales and use tax. They
are necessary and essential to and used in connection with the printing process
by a person engaged in the printing or imprinting of tangible personal property
for sale.

Response: The pagination system qualifies as exempt manufacturing equipment
under Texas Tax Code Section 151.318(t).

A complete set of rules, along with the text of the Tax Code, and a wealth of
other information are available through our website at
through the "Texas Taxes" window.

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

I hope this information answers your questions. If you need additional
information, please call me toll-free at 1-800-531-5441, extension 3-4502. The
direct line is 512/463-4502. You may also write to Tax Policy Division,
Comptroller of Public Accounts.

Sincerely,

Gilbert Zamora
Tax Policy Division