Were Texas calligraphy charges taxable, and how were resale work, materials, and donations treated?

Plain-English summary

The total charge for paid calligraphy was taxable whether the artist supplied the item or added lettering to customer-supplied paper, text, or a book. A completed camera-ready design was also taxable.

The artist paid tax on tools and other items consumed in providing the work, but could buy ink, paper, or other property physically transferred to the customer with a resale certificate. A reseller buying calligraphy for resale could give the artist a valid resale certificate and then collect tax from the final customer.

Donated labor was not taxable because the artist received no consideration, regardless of the recipient. Materials donated to a qualifying exempt organization could be acquired or removed from tax-free inventory without tax if properly documented. Materials donated to a nonqualifying nonprofit, for-profit organization, or as a personal gift were taxable to the artist.

Common questions

Was calligraphy on a customer-supplied item taxable? Yes.

Was camera-ready artwork taxable? Yes.

Could a reseller give the artist a resale certificate? Yes.

Was donated labor taxable? No, because there was no consideration.

Were all donated materials exempt? No. The recipient had to be a qualifying exempt organization.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8908L0948F01

Original ruling text

August 11, 1989

Dear ***:

Thank you for your letter requesting information on the taxability of the
items and services you sell in your business.

You indicated in your letter that you were in the business of selling
printed materials, frames, mats, and performing calligraphy services. You also
listed specific transactions on which you would like to determine the correct
tax treatment. I have rephrased your questions and provided the taxability
responses.

Do I tax my customers when:

Question 1: Items are supplied by my customers to which I have added
calligraphy?

Answer: Yes. The total charge for calligraphy is taxable to your
customer. You owe tax on pens, tools, and other items you use to provide
calligraphy; you may purchase the ink and any other items transferred to your
customer tax-free by issuing a resale certificate to your supplier.

Question 2: I supply a completed camera-ready design on paper?

Answer: Yes. Camera-ready artwork is taxable to your customer. Again,
you owe tax on tools and items you use to provide the camera-ready artwork; you
may purchase the ink and paper that is transferred to your customer tax-free by
issuing a resale certificate to your supplier.

Question 3: I prepare, in calligraphy, a text (such as a poem) supplied
by my customer?

Answer: Yes. The charge for calligraphy is taxable to your customer.
You must pay tax on items you use and may issue a resale certificate to your
supplier in lieu of tax on items resold (transferred) to your customer.

Question 4: My customer supplies the paper and information to calligraph
and he will in turn resell the item to his customer, taxing his customer
accordingly?

Answer: The charge for calligraphy is taxable. However, because your
customer is purchasing the calligraphy for resale, he does not pay tax to you
on the calligraphy charge if he gives you a properly completed and valid resale
certificate in lieu of tax. He must add tax to the sales price his customer
pays for the taxable item.

Question 5: I inscribe a book with calligraphy?

Answer: The total charge for calligraphy is taxable to your customer.

Question 6: I donate my calligraphic services to nonprofit organizations?

Answer: Calligraphy (labor) that you donate to non-profit or exempt
organizations is not taxable because you receive no consideration (tax base) on
which the tax is assessed. This is also true for labor donated to any entity.
Materials that you donate to qualifying exempt organizations may be purchased
tax-free by issuing an exemption certification to your supplier. You may also
remove these materials from a tax-free inventory without accruing tax on your
costs as long as you carefully document this use. Materials that are donated
to a non-profit or a for-profit organization, (that is, the entity is not a
qualifying exempt organization) are taxable to you at the time of purchase.

Question 7: I donate framed items to a church bazaar?

Answer: You owe no tax on the cost of the items you donate to an exempt
organization. Please see answer 6 and the enclosed Rules 3.287 and 3.322.

You have indicated in your letter that you have already paid tax on your
materials. I will review the basic procedures on purchases. Purchases of
items which will be resold (physically transferred) to your customer may be
purchased tax-free from your suppliers; you must provide your supplier with a
properly completed and valid resale certificate in lieu of tax. Items
purchased for your use in the performance of calligraphic services, or items
that will be donated to non-exempt entities, or items given as gifts are
taxable to you at the time of purchase. Items purchased tax-free which are
converted from inventory to your own use, such as given to a friend as a gift,
are taxable to you based on the amount you paid for materials.

You should begin collecting tax on all taxable sales upon receipt of this
letter. Maintain this letter in your files in case of audit. If the sales are
sales for resale supported by a resale certificate or sales to exempt
organizations supported by an exemption certificate, you are not required to
collect the tax. I apologize for the misinformation you received and I hope
this letter will prove to be helpful.

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

If you have any questions or need more information, you may write to
Tax Correspondence, Comptroller of Public Accounts.

Sincerely,

Tax Correspondence