Texas Letter Ruling 9210L1198D01: Caricature Artists/Cartoonists Charges For Drawings At Party/Parties

Subject

Caricature Artists/Cartoonists Charges For Drawings At Party/Parties

Plain-English summary

The Texas Comptroller's Tax Administration Division responded to a taxpayer's letter asking about the sales tax treatment of caricature drawing at parties. The Comptroller ruled that caricature drawing is graphic art, which counts as a sale of tangible personal property. That means the artist must collect Texas sales tax on the total amount charged to produce the drawings, based on Rule 3.312 concerning graphic art.

There is one exception carved out in the letter. Rule 3.298, section (f)(1), on amusement services, lets a seller of a taxable amusement service buy tangible personal property tax-free if that property is transferred into the care, custody, and control of the person who pays for the amusement service. Applying that to caricature artists: if the artist's drawings are provided to guests as part of the admission charge to a party (i.e., the artist is essentially working for an amusement-service provider), the artist may accept a resale certificate from that amusement-service provider instead of collecting sales tax directly. In that scenario, the amusement-service provider is the one who collects and remits sales tax, but on the admission charge to the party rather than on the drawings themselves.

The Comptroller noted this opinion is based on the facts presented, and could change if the facts are different.

What this means for you

Caricature artists and cartoonists

If you draw caricatures directly for customers at a party and charge them for it, you are selling tangible personal property (graphic art), and you must collect Texas sales tax on your total charge for the drawings.

If, instead, you are hired by a party or amusement company, and your drawings are given to guests as part of what they paid to get into the event (their admission charge), you don't have to collect sales tax on your charge to that amusement company. You may accept a resale certificate from them in place of tax. The amusement-service provider then becomes responsible for collecting and remitting sales tax on the admission charge itself.

Party planners and amusement-service providers

If you sell admission to an event or party that includes caricature drawings as part of what guests receive, you can give your caricature artist a resale certificate so they don't charge you sales tax on their fee. In exchange, you must collect and remit sales tax on your admission charge to the event, since that's where the taxable transaction now sits.

Accountants and tax professionals

The key distinction in this ruling is who is selling to the end consumer. When the caricature artist sells directly to the party guest, Rule 3.312 (graphic art) governs, and tax is due on the artist's total charge. When the artist is instead a supplier to an amusement-service provider who resells the drawings as part of admission, Rule 3.298(f)(1) shifts the taxable event to the admission charge, and a resale certificate can flow between the artist and the amusement-service provider.

Common questions

Q: Do I have to charge sales tax if I draw caricatures at a party and the guests pay me directly?
A: Yes. Caricature drawing is graphic art and is taxable as a sale of tangible personal property. You must collect sales tax on your total charge to produce the drawings.

Q: What if a party company hires me to draw caricatures as part of the entertainment package they sell to guests?
A: If your drawings are provided to purchasers of the amusement services as part of the admission to the party, you may accept a resale certificate from the amusement-service provider instead of charging them sales tax. The amusement-service provider then collects and remits sales tax on the admission charge.

Q: Which Comptroller rules apply here?
A: Rule 3.312, on graphic art, applies to a caricature artist's direct sales to customers. Rule 3.298, section (f)(1), on amusement services, applies to the resale-certificate exception when the artist supplies an amusement-service provider.

Q: Does this ruling apply to my situation?
A: This letter is based on the specific facts the taxpayer described, and the Comptroller noted the opinion could change with different facts. Letters on STAR can only be relied upon by the taxpayer who received them.

Citations and references

Rules cited:

• Rule 3.312 (graphic art) — governs taxability of the artist's direct charges for caricature drawings
• Rule 3.298(f)(1) (amusement services) — allows a taxable-amusement-service seller to buy tangible personal property tax-free via resale certificate when it is transferred to the person paying for the amusement service

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9210L1198D01

Original ruling text

ALERT: For specific guidance relating to the care, custody and control of TPP when providing a taxable service, please see Rule 3.285, Resale Certificates; Sales for Resale (amended 11/01/2017.

October 28, 1992

Dear ***:

Thank you for your letter concerning caricature drawing at parties.

Caricature drawing is graphic art that is taxable as a sale of tangible
personal property. You must collect sales tax on your total charges to produce
the drawings. Please review the enclosed Rule 3.312 concerning graphic art.

However, section (f)(l) of Rule 3.298 (enclosed) on amusement services allows a
seller of a taxable amusement service to purchase tangible personal property
tax-free if it is transferred to the care, custody, and control of the person
paying for the amusement services. You may accept a resale certificate in lieu
of sales tax from the amusement service provider if your caricature drawings
are provided to purchasers of the amusement services as part of the admission
to the party. In turn, the amusement services provider must collect and remit
sales tax on the admission charge.

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

You may call me toll free at 1-800-252-5555, ext. 5-0030. The direct line is
512/475-0030. You may also write to Tax Administration, Comptroller of Public
Accounts.

Sincerely,

David Somerville
Tax Administration Division