Does the Texas Comptroller agree that the industry-published 'Sales Tax Guide for Texas Printers' (June 1995 edition) — covering when printers charge sales tax, what equipment/energy purchases qualify for the manufacturing exemption, and how to claim refunds — reflects current Comptroller policy?

Plain-English summary

This letter is not a typical taxpayer-specific ruling. It is the Texas Comptroller's Tax Administration Division (signed by Gilbert Zamora) responding to Printing Industries of the Gulf Coast and Printing Industries Association of Texas, who had asked the Comptroller to review their trade-association publication, "Sales Tax Guide for Texas Printers" (June 1995 edition). The letter opens with a page-by-page markup of specific corrections (additions underlined, deletions struck through in the original) and then reproduces the full corrected text of the guide itself, including its introduction, body, and appendix.

The guide's introduction states that "as of the date of their review (May, 1995) printers, publishers and graphic arts firms may rely on the information contained in this book as representing the current policy" of the Comptroller's office — meaning this letter functions as the Comptroller's endorsement of the guide as an accurate statement of sales/use tax policy for the printing industry at that time, subject to the corrections shown.

Sales by a printer (as a seller): Sales of printing, copies, negatives, type, art, embossing, laminating, binding, coating, and (starting July 1, 1995) mailing/fulfillment services are taxable unless the customer gives a valid Texas Certificate of Resale or Certificate of Exemption. Mailing and fulfillment services (making labels, addressing, zip coding, sorting, stuffing, metering, etc.) were exempt before July 1, 1995 but become taxable on that date. Professionals such as architects, engineers, and attorneys who provide tangible items (blueprints, copies, courtroom graphics) as part of a non-taxable professional service must pay sales tax on those purchases themselves, since they typically lack a Texas sales tax permit and can't issue a resale/exemption certificate.

Purchases by a printer (as a buyer) — the manufacturing exemption: Under Rule 3.300 (the "Manufacturing Exemption"), items necessary and essential to manufacturing, processing, or fabricating a printed product for sale are exempt from sales tax, including paper, ink, printing plates, platemaking chemicals, film and processing chemicals, typesetting supplies, and (with an asterisk noting the requirement that they be used for typesetting/pre-press or to operate exempt equipment) magnetic tape, computer diskettes, and electronic printer toner. Manufacturing equipment — printing presses, electronic duplicators, litho cameras, typesetting and electronic pre-press equipment (including computers used exclusively for setting type or creating images), platemaking and finishing equipment, and mailing equipment used predominantly in a printing operation — is also exempt. This exemption phased in: 50% of state tax exempt starting October 1, 1993 (3.125% effective rate), 75% exempt starting January 1, 1994 (1.5625% effective rate), and 100% exempt (no state or local tax) starting January 1, 1995.

Energy (gas and electricity) — the specific topic in this file's title: Section (i) of the guide addresses energy used in manufacturing. Gas or electricity used in manufacturing, fabricating, or processing tangible property for sale is exempt if necessary and essential to that process. Listed exempt uses include operating printing equipment; operating typesetting, pre-press, or bindery/finishing equipment; operating gas or electric dryers on printing presses; operating a hot water heater serving the manufacturing area; operating air conditioning serving manufacturing areas; and lighting in pre-press, printing, and finishing areas. To claim the exemption, the guide requires an Energy Use Study certified by an electrical engineer or accredited engineering graduate proving that more than 50% of the energy on a given meter is used for manufacturing. If a separate meter serves only production areas, all of that meter's electricity is exempt. If a single meter covers mixed uses, the exemption applies to 100% of that meter's cost only if the Energy Use Study shows manufacturing use exceeds 50%. No energy exemption is available for shared-tenant buildings (unless all tenants are exempt and a building-wide study is done) or where utilities are bundled into rent/lease payments. In-plant (captive) printing operations that serve only their parent company are not eligible for the energy exemption at all.

Other topics covered by the guide and confirmed by the Comptroller:

• In-plant printers: The manufacturing exemption does not apply to in-plant (internal/captive) printing operations; their purchases are taxable, though intra-company "sales" are not subject to sales tax.
• Sales/use tax rates: As of January 1, 1995 the state rate is 6.25%, with combined state/local/MTA rates capped at 8.25%, based on where the customer takes possession.
• Refunds: Tax paid in error must be claimed within 48 months. Two paths exist — request a refund/credit directly from the vendor who collected the tax, or (if the vendor refuses) obtain a signed Assignment of Right to Refund from the vendor and request the refund directly from the Comptroller's Revenue Accounting Division.
• Record retention: Sales tax records (invoices, resale/exemption certificates, job tickets, contracts, shipping records) must be kept at least 48 months.
• Waste disposal: Charges for hazardous/industrial solid waste disposal, reclamation, and transportation are generally exempt, but items like storage containers, labels, and testing supplies/services are taxable.
• TeleFax services: A printer's dedicated phone line and supplies used to resell TeleFax service to customers can be purchased exempt with a resale/exemption certificate, but the printer owes tax on the portion of use that is for its own internal purposes, and on the TeleFax machine itself.
• Pollution control equipment: Equipment required by a regulatory authority (air cleaners, silver recovery units, solvent reclamation units) is exempt under Rule 3.295, as is the energy used to run it (subject to the same predominant-use test) and supplies needed to operate it.
• Sales tax audits: The guide walks through why a company might be selected for audit, what to expect at the initial audit meeting, what records to have ready, and the taxpayer's right to challenge an auditor's report to the Comptroller, a Dispute Resolution Officer, an Administrative Law Court, or a District Court.
• Appendix: Lists other relevant Comptroller rules for the industry, including Rule 3.299 (Newspapers, Magazines, Publishers), Rule 3.308 (Computers, Hardware, Software), Rule 3.312 (Persons Engaged in Graphic Arts), and Rule 3.314 (Wrapping, Packaging, Container, Labels), plus sample Texas Certificate of Exemption and Certificate of Resale forms.

What this means for you

Newspaper and commercial printing businesses

If gas or electricity is used to run your printing presses, typesetting/pre-press equipment (including computers used exclusively for imaging or type), bindery/finishing equipment, or air conditioning and lighting that serve those production areas, that energy can be purchased tax-exempt — but only if you commission an Energy Use Study (certified by an electrical engineer or an accredited engineering graduate) proving that more than 50% of the usage on the relevant meter is for manufacturing. Without that study, you cannot support the exemption in an audit.

Businesses in shared buildings or with bundled utilities

Watch two traps: if your facility shares a building with other (non-exempt) tenants and there's no dedicated meter or building-wide study, you get no energy exemption at all; and if your rent or lease already bundles in utilities rather than billing them separately, no energy exemption is available regardless of actual manufacturing use.

In-plant/captive print shops

If your printing operation exists only to serve your own company (not outside customers), you are not eligible for the manufacturing exemption or the energy exemption — all of your purchases are taxable, even though your intra-company transfers of finished printed material are not "sales" subject to tax.

Accountants and tax professionals advising printers

Track the phase-in dates carefully for any historical exemption claims or refund requests: 50% state-tax exemption from October 1, 1993; 75% from January 1, 1994; and full (100%) state and local exemption from January 1, 1995 onward. If a client overpaid sales tax on exempt equipment or energy before understanding these rules, refunds must be sought within 48 months of the payment/reporting date, either from the original vendor or, if the vendor won't cooperate, directly from the Comptroller's Revenue Accounting Division using an Assignment of Right to Refund.

Mailing and fulfillment service providers

Mailing and fulfillment services (labeling, addressing, sorting, stuffing, metering, etc.) were not taxable before July 1, 1995, but became taxable to customers as of that date unless the customer provides a resale or exemption certificate. Separately stated U.S. postage charges remain non-taxable, but "handling" or service fees related to postage are taxable.

Common questions

Q: Is gas and electricity used to run darkroom, typesetting, and computer equipment in a print shop exempt from Texas sales tax?
A: It can be, if that energy is necessary and essential to manufacturing/processing a printed item for sale and you have a certified Energy Use Study showing more than 50% of the metered usage is for manufacturing. Listed exempt uses include operating printing, typesetting, pre-press, and bindery/finishing equipment, plus A/C and lighting serving those production areas.

Q: Does a print shop need a separate electric meter to claim the energy exemption?
A: Not necessarily. If a single meter covers mixed uses, the full exemption still applies to that meter's cost, but only if the Energy Use Study shows manufacturing use is more than 50% of total usage on that meter. A dedicated production-only meter is exempt in full without needing to prove a percentage.

Q: When did manufacturing equipment for printers become fully exempt from Texas sales tax?
A: The exemption phased in — 50% of state tax exempt from October 1, 1993, 75% exempt from January 1, 1994, and 100% (no state or local tax) from January 1, 1995 onward.

Q: Are mailing and fulfillment services taxable in Texas?
A: As described in this June 1995 guide, they were not taxable before July 1, 1995, but became taxable to customers starting on that date, absent a valid resale or exemption certificate.

Q: Can an in-plant (captive) print shop claim the manufacturing exemption?
A: No. The guide and the Comptroller's review confirm that Rule 3.300's manufacturing exemption does not apply to in-plant printing operations that serve only their parent company.

Q: How long do I have to request a refund of Texas sales tax paid in error?
A: 48 months from the date the tax was paid or reported, using either the vendor-refund process or, if the vendor refuses, a direct claim to the Comptroller's Revenue Accounting Division with an Assignment of Right to Refund from the vendor.

Citations and references

Regulations:

• 34 Tex. Admin. Code Rule 3.300 (Manufacturing Exemption)
• 34 Tex. Admin. Code Rule 3.325 (refund/credit procedures referenced in the guide)
• 34 Tex. Admin. Code Rule 3.338 (referenced in the guide's assignment-of-refund instructions)
• 34 Tex. Admin. Code Rule 3.295 (Pollution Control Equipment)
• 34 Tex. Admin. Code Rule 3.375 (City Use Tax, referenced for out-of-state/out-of-city shipments)
• Other rules listed in the guide's appendix as relevant to the industry: Rules 3.281, 3.285, 3.286, 3.287, 3.292, 3.299, 3.303, 3.308, 3.312, 3.314, 3.321, 3.322, 3.346, 3.374, 3.424, 3.425

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9506L1351C01

Original ruling text

June 7, 1995

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Dear ***:

Thank you for your letter requesting that we review your "Sales Tax

Guide for Texas Printers". I apologize for the extended period of time

that it took to review this guide book. I have reviewed your guide book

and have listed recommended additions and deletions below. Recommended

deletions are struck through and additions are underlined.

Significant Changes Since Last Issue

(6) Regarding fulfillment services - no change in this area, delete

all of this section

I. The Printers Responsibilities as a Seller.

General Sales Tax Policy:

Any sale of printing, ... coating, mailing services fulfillment

services or any other ...

Page 5:

Exempted from the sales tax on transportation or delivery charges are:

(2) charges for US postage at the request of the customer are exempt if

separately stated on your invoice and the items are mailed to a third

party at the request of the customer;

Mailing and Fulfillment Services

Delete: Effective July 1,1995 ... to the purchaser prior to July, 1995).

Separately stated charges for mailing and fulfillment services continue

to be exempt from sales tax.

Charges for U.S. postage or reimbursement for U.S. postage costs are

not taxable if shown as a separate item on the mailers invoice to the

purchaser and the items are mailed to a third party at the request of

the customer.

Page 6: SALES BY THE PRINTER THAT ARE NOT TAXABLE (EXEMPT):

Some Sales of printing or related products are exempt from Texas sales

tax if provided the seller is provided with a valid Texas Certificate

of Exemption, ...

(e) A newspaper Insert ... and the pruchaser purchaser ...

(i) Mailing and fulfillment services ...

Page 7: II THE PRINTER'S RESPONSIBILITY AS A BUYER

The act of printing ... process:

Mailing and/or Fulfillment

These manufacturing ... such as:

Mailing or Fulfillment Services.

Page 8: (c) Purchase of Equipment ...

October 1, 1993:

Tax is 50% of the State 6.25% portion of the sales tax, or

3.13 3.125%

plus local or metro sales tax.

January 1, 1994:

Tax is 25% of the state 6.25% portion of the sales tax, or

1.56 1.5625%

plus local or metro sales tax.

Page 9:

(e) Leased and Rented ... Parts and Accessories Used in the Actual

Manufacturing, Processing, Fabrication, or Repair of Tangible Personal

Property to be Sold.

Page 10:

(b) Manufacturing Equipment.

Mailing equipment - exempt as manufacturing equipment if predominantly

used as part of a printing operation. Will not qualify for exemption if

used primarily to provide a mailing service.

Page 12:

(i) Energy (electricity or gas:

Operation of air conditioning systems which service manufacturing

areas (qualify as exempt use when temperature and humidity have a

direct effect on product):

Page 13:

IV. Sales and Use Tax Rates

Printers must charge the sales tax rate based on where the taxable items

are picked up, delivered, or shipped to the customer customer takes

possession.

One place of business. If a retailer has only one place of business

and the place of business is in a taxing city or county, all sales,

leases, and rentals by the retailer are subject to city sales tax based

upon the location of the place of business. See the exceptions below:

Multiple places of business. If a retailer has more than one place

of business in this state, city or county sales tax is due and is

allocated to the city or county in which the retailer's place of

business is located:

(A) where the customer takes possession of the item sold, leased, or

rented: or

(B) from which the item is shipped or delivered.

MTA tax has different rules

Exceptions:

Drop shipment by supplier receiving order. If a purchaser places an

order directly with a retailer's supplier, and the items are shipped

or delivered directly to the purchaser by the supplier, city sales tax

is due and is allocated to the city where delivery is made or

possession is taken by the purchaser.

Shipments from outside a taxing city or outside Texas.

Notwithstanding any of the foregoing provisions, if the retailer

makes deliveries of taxable items from a location not in a taxing city

or from outside the State of Texas to a Texas purchaser located

inside a taxing city, the city use tax is applicable. See Rule 3.375

concerning City Use Tax.

Page 14: V. Claiming Refunds for Taxes Paid in Error

In the event ... (4 48) years months of the date the tax was paid or

reported due and payable.

HOW TO COMPLETE THE "REQUEST FOR A REFUND OF TEXAS SALES TAX" FORM:

YOU MUST FIRST ...

(a) attach the Assignment to your Request For, Exhibit 1 with copies of

invoices (if 10 or less, if more than 10 list them on a schedule and

submit the schedule); and,

INFORMATION AND INSTRUCTIONS: For completing Exhibit 1.

Instructions to Vendor:

If you provide the purchaser ... you may reduce your taxable sales and

payment to the Comptroller of Public Accounts on a subsequent return in

the amount refunded or credited. You should retain by providing a copy

of the purchaser's information as shown on the Request Form and its

attached Exhibit 1 (corrected by you) to the Comptroller with your

subsequent return in your files.

Page 15: (2) YOU MAY REQUEST A REFUND ... DIRECTLY TO THE STATE

THROUGH YOUR SUPPLIER.

Page after Page 15: - REQUEST FOR REFUND OF TEXAS SALES TAX

needs signature line for purchaser

INFORMATION AND INSTRUCTIONS: For Completing Exhibit 1.

(a) attach the assignment to your Request form, Exhibit 1 with copies

of invoices (if more than 10 invoices, provide schedule listing invoices

only and retain invoices in your files as documentation); and,

Page 22:

(1) (a) and, the purchaser printer retains ownership;

The purchaser printer must pay sales tax to the seller of the ...

(b) or, the purchaser printer transfers ownership to the customer:

The purchaser printer is exempt...

(2) Waste Disposal, Waste Transportation, Waste Reclamation:

Generally, charges for disposal or reclamation of hazardous waste and

industrial solid waste, as that term is defined in Health and Safety

Code, Chapter 361, with the exception of industrial solid waste which

meets the definition of garbage or municipal solid waste, are exempt

from Texas sales tax.

Page 23:

(a) Exempt purchases related to ...

Waste disposal services for hazardous waste and industrial solid waste

as that term is defined in Health and Safety Code, Chapter 361, with

the exception of industrial solid waste which meets the definition of

garbage or municipal solid waste;

(e) The charges made to the printer for supplies and materials actually

transferred to the customer (i.e., paper, toner) to operate the as the

result of providing a TeleFax ...

(Note: The reason for the exemption ..."Supplies or materials

transferred to customers purchased to operate a TeleFax ...

Page 24:

Pollution Control Equipment

The purchase of pollution control equipment ... process is purchase

exempt ...

The energy (gas or electricity) used to operate the pollution control

equipment is an exempt purchase will qualify for exemption only if the

predominant use of all gas or electricity used qualifies.

Page 25:

(3)(f) Once the auditor completes the on-site review of your records

an exit conference will be held at which the auditor will discuss any

audit adjustments made and provide you will a listing of additional

certificates or documentation needed (if any). After reviewing and

making adjustments for any additional documentation you provide, the

auditor will then prepare a report that will state the audit findings,

including the reason for any adjustments and any additional taxes,

penalties and interest due.

(4) You have the right to challenge the Auditor's Report to the

Comptroller, a Dispute Resolution Officer (DRO), an Administrative

Law Court, or in a District Court. All of these ...

Page 26:

(4) You have the right to challenge the Auditor's report to a Dispute

Resolution Officer, the Comptroller, an Administrative Law Judge, ...

IX. Appendix

Resale and exemption certificates replaced with most current version and

are attached.

This opinion is based on the facts presented. Other facts though similar

may provide a different result.

You may 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 Administration,

Comptroller of Public Accounts .

Sincerely,

Gilbert Zamora

Tax Administration Division

Sales Tax Guide For Texas Printers"

Significant Changes Since Last Issue:

(1) All references to the previous policy of "expended or without value

within six months" has been removed since these purchases are now exempt.

This includes the items previously referred to as "printer's aids".

(2) A new section has been added about the Sales Tax Audit. The idea of

this section is to let them know what causes an audit; how to prepare;

what to do if they disagree; and, what their remedies are. (page 17)

(3) The Texas Certificate of Exemption Form has been revised to match

current policy. (Appendix)

(4) The entire current Rule 3.300 is printed in the book. (Appendix)

(5) The new exemptions for electronic pre-press equipment, copiers,

electronic duplicators and their supplies, and accessories has been included.

(page 10)

(6) A new section covering the taxability of mailing and fulfillment

services (exempt at this time) has been changed for these services to become

taxable July 1, 1995. (page 5.)

Note: Customers who purchase these services from mailers and fulfillment

services typically have annual contracts with their vendor. Therefore, some

notice period needs to apply so that the mailing and fulfillment services

can notify their customers of the additional cost of adding sales tax. We

have suggested July 1, 1995 as the soonest this tax should become effective.

A later date (say August or September) would be even better.

(7) A section on sales to architects, engineers etc., which do not have

sales tax permits, has been added. Also added is a line in this section

having to do with architects, engineers, etc., which have sales tax

permits. (page 4.)

(8) A section of the "occasional sale of equipment" has been added. (page 5.)

Price: $5

SALES TAX GUIDE FOR TEXAS PRINTERS

I. The Printer's Responsibility A Seller - 4

When To Charge Texas Sales Tax - 4

Sales That Are Not Taxable (Exempt) - 5

II. The Printer's Responsibility As A Buyer - 6

When Texas Sales Or Use Tax Must Be Paid - 7

Exempt Purchases - 9

III. The In-Plant Printer's Responsibility - 13

IV. Sales And Use Tax Rates - 13

V. Claiming Refunds For Taxes Paid In Error - 13

VI. Maintaining Your Sales Tax Records - 15

VII. Other Sales & Use Tax Information - 15

Creative Items (Photographs, Slides, Art Etc.) - 15

Waste Disposal, Waste Transportation, Waste Reclamation - 15

TeleFax Machine Services Sold To Customers - 16

Pollution Control Equipment - 17

VIII. The Sales Tax Audit - 17

IX. Appendix - 19

Other Sales & Use Tax Rules - 17

Rule 3.300 (Manufacturing Exemption)

Texas Certificate Of Exemption And Resale Forms

Published By: PRINTING INDUSTRIES OF THE GULF COAST

1324 West Clay Street

Houston, Texas 77019

(713)522-2046 or(800)448-5930

TeleFax (713)522-8342

JUNE, 1995

SALES TAX GUIDE FOR TEXAS PRINTERS

INTRODUCTION

INTRODUCTION

Since the publication of the last Sales Tax Guide For Texas Printers in

1990, there have been a number of changes in the law and a number of

Rulings by the Comptroller of Public Accounts that affect printers

and publishers in Texas.

It is important that printing, publishing and graphic arts industry

companies understand Texas Sales and Use Tax laws and rules that apply

to their industry in order to avoid problems during an audit and the

possible payment of back taxes and penalties.

The Sales Tax Guide For Texas Printers, June 1995 edition, was written

by the staff of Printing Industries of the Gulf Coast and Printing

Industries Association of Texas and submitted to officials at the Texas

Comptroller of Public Accounts for their review. The changes submitted

by the Comptroller's office have been made and appear in the book.

The Comptroller's office advises us that as of the date of their review

(May, 1995) printers, publishers and graphic arts firms may rely on the

information contained in this book as representing the current policy

of the office of the . However,

users of this book should be aware that sales & use tax law and rules

are subject to change from time to time as a result of changes by the

Texas Legislature, Administrative Law court decisions, State Court

decisions and policy changes by the Comptroller's office.

The purpose of this book is to address the laws and rules that apply

to Texas printers, publishers and graphic arts firms. Not all of your

questions can be answered in a book and we recommend that if you need

more information, or clarification of information contained in the book

that you contact your association, Printing Industries of the Gulf Coast

or Printing Industries Association of Texas, or the Comptroller of

Public Accounts office.

In the event Texas Sales & Use Tax laws or rules change, Printing

Industries of the Gulf Coast and Printing Industries Association of

Texas will issue Reports to the industry regarding these changes.

Printing Industries of the Gulf Coast

1324 West Clay Street

Houston Texas 77019

(713) 522-2046 or (800) 448-5930

TeleFax: (713) 522-8342

Printing Industries Associationof Texas

910 West Mockingbird

Dallas, Texas 75247

(214) 630-8871 or (800)788-2040

TeleFax: (214) 688-1767

Comptroller of Public Accounts

State of Texas

(800)252-5555

I. THE PRINTER'S RESPONSIBILITY AS A SELLER

WHEN TO CHARGE TEXAS SALES TAX

General Sales Tax Policy:

Any sale of printing, copies, negatives, type, art, embossing,

laminating, binding, coating, mailing services fulfillment services or

any other process involved with the producing a printed piece which

is sold to a customer is taxable, unless you are provided by the

customer with a valid Texas Certificate of Resale, or a valid Texas

Certificate of Exemption.

Sales To Architects, Engineers, Attorneys, Accountants And Other

Professionals Not Required To Have A Texas Sales & Use Tax Permit:

Sales To Architects, Attorneys, Engineers, etc. who are providing

non-taxable services to their clients, and which are not required to

charge sales tax even if they provide tangible personal property such

as copies, legal documents, blueprints, courtroom graphics, photographs,

etc. to their clients as part of their professional service, are taxable.

These professionals must pay sales tax when purchasing these items

regardless of the exempt or non-exempt nature of their client.

The professional cannot provide a Texas Certificate of Exemption, or a

Texas Certificate of Resale to the graphic arts firm because the

professional does not have a Texas Sales Tax Permit.

(Note: To avoid sales tax, the professional may request the exempt

client to purchase these items directly from the graphic arts firm,

providing the graphic arts firm with a valid Texas Certificate of

Exemption )

Should the professional be selling his services through a company that

HAS a Texas Sales & Use Tax Permit and is charging sales tax on these

items to their client, then this Company can provide a Texas Certificate

of Resale to the graphic arts firm, and resell the item to the client

showing these items separately on an invoice to the client. In this

case, if the client is exempt, the exempt client would provide the

Company a valid Texas Certificate of Exemption.

Sales of Transportation and Delivery Services:

(a) Transportation and delivery charges, when shown as a separate item

on your invoice, or when included in the price of an item, is taxable.

The sales tax applies to all transportation or delivery charges to a

customer when a taxable item is sold, leased or rented.

Exempted from the sales tax on transportation or delivery charges are:

1) if the item sold is exempted from sales tax, and you are provided

with a valid Texas Certificate of Exemption by the customer, the charges

for transportation or delivery are also exempt.

2) charges for postage are exempt if separately stated on your invoice:

and the items are mailed to a third party at the request of the

customer.

3) if the item is sent C.O.D by your company and the transportation or

delivery charges are to be paid by the customer, or the customer is

being billed directly by the freight company or delivery service for

shipping or delivery charges, you do not charge sales tax.

(4) the portion of transportation or delivery charges which are shipped

and received out-of-state is not taxable.

(Example: ABC Litho, located in Ft. Worth, printed 15,000 booklets for

a client. The client wants 5,000 copies sent to Houston, 5,000 sent to

Waco, and 10,000 sent to Los Angeles, California. Printing shipped

out-of-state is not taxable, the shipping charges to Houston and Waco

are taxable. The shipping charges to Los Angeles are not taxable. Or, if

the freight company makes one charge for all three deliveries, sales

tax would be due based on the percentage of the charges shipped to a

location in Texas, such as in this example, 66% of the charges.)

Occasional Sale of Equipment:

The printer or related business must charge sales tax to the purchaser

unless the purchaser provides you with a valid Texas Certificate Of

Resale or Texas Certificate Of Exemption.

Mailing And Fulfillment Services:

Effective July 1, 1995 charges made for mailing and Fulfillment Services

(making labels, affixing labels, addressing, zip coding, maintaining a

mailing list, sorting, stuffing, inserting, gathering, bundling,

constructing, metering, fulfilling orders, etc.) are subject to Texas

Sales or Use Tax when sold to a customer unless the customer provides

a valid Texas Certificate of Exemption or valid Texas Certificate of

Resale. (Note: These services are not taxable to the purchaser prior

to July 1, 1995)

Charges for postage or reimbursement for postage costs are not taxable

if shown as a separate item on the mailers invoice to the purchaser.

Charges for "handling" of the purchase of postage or "service fee" for

performing services related to mailing or fulfillment are

taxable charges."

SALES BY THE PRINTER THAT ARE NOT TAXABLE (EXEMPT):

Some sales of printing or related products or services are exempt from

Texas sales tax provided the seller is provided with a Texas Certificate

of Exemption, or a Texas Certificate of Resale by the customer.

Important: In the absence of a Texas Certificate of Exemption, or

Texas Certificate of Resale, sales tax must be collected.

Provided the seller has received a valid Texas Certificate of Resale

or valid Texas Certificate of Exemption from the customer, the

following sales are exempt from Texas Sales Tax:

(a) The item is sold for resale and the purchaser provides a valid

Texas Certificate Of Resale to the seller.

(b) The item, or portion of the item, is shipped to, and received by,

a location outside the State of Texas. The portion shipped to, and

received, at a location outside the State of Texas is not taxable.

he portion shipped to and received, at a location within the state

of Texas is taxable.

(c) The purchaser is the U. S. Government, an agency of the State of

Texas, a Texas city, county or other political subdivision.

(d) Religious, Educational and Charitable Organizations qualifying

under IRS Codes. Section 501 (c)(3), (c)(4), (c)(8), (c)(10)

and (c)(l9). and non-profit Chambers of Commerce. (Note: IRS

Section 501 (c)(6) organizations, such as non-profit trade

associations, business leagues or professional groups, are not

exempt from sales tax.)

(e) A Newspaper Insert Sold B A Printer Directly To A Newspaper and

the purchaser provides a valid Texas Certificate of Exemption to

the seller..

(f) Charges for Prepayment or Reimbursement for U. S. Postage. (Note:

The handling fee or charge for performing this service is taxable.)

(g) C.O.D. Transportation Charges are exempt if the item is shipped

C.O.D.

(h) Transportation charges if the item being shipped is exempt; or,

the organization purchasing the item is exempt; or, the portion of

the item which is shipped to a location outside the state of Texas

is exempt. (See Sales of Transportation and Delivery Charges on

page 4)

(i) Mailing and fulfillment services (as described on page 5)

sold prior to July 1,1995.

II. THE PRINTER'S RESPONSIBILITY AS A BUYER

Printers, publishers and related businesses purchase items (a) for

their own use, (b) to be used in the manufacturing of an item, and

(c) for resale to a customer. This Section covers Texas Sales & Use

Tax policy regarding these types of purchases by the graphic arts firm.

The State of Texas provides incentives to manufacturers, fabricators

and processors to do business in the State by exempting certain

purchases of materials, supplies and equipment necessary and

essential to manufacturing, fabricating or processing.

The printing industry, as well as some publishers who print, is a

manufacturing industry and therefore eligible for these exemptions.

The act of printing (alone) is not the only manufacturing process

performed by companies doing business in the industry. Here is a list

of the various manufacturing processes performed by the industry. Many

of these may be performed within a single company, or a company may

specialize in the performing of only one or two of these manufacturing

processes:

Graphic Design and Illustrations: Making Photographs,

Slides, etc.;

Making Negatives;

Typesetting/Imaging;

Proofing; Platemaking;

Finishing/binding: Printing;

Mailine and/or Fulfillment: Packaging.

These manufacturing activities are performed for customers in

a

variety of ways, using technology pertinent to the many kinds

of

companies such as:

Photographers:

Illustrators;

Typesetters; Forms

Manufacturers:

Pre-press Service Bureaus; Envelope

Manufacturers:

Color Separators;

Desk-Top Publishers;

Commercial Printers: Screen Process

Printers:

Quick Printers; Label

Printers;

Blueprinters; Graphic

Designers:

Thermographers: Carton

& Box Printers:

Engravers;

Flexographic Printers;

Newspapers;

Circular Printers;

Heat-Set Web Printers;

Non-Heat Set Web Printers;

Bookbinders; Trade Services:

Printing Finishers; Mailing Or

Fulfillment Services.

When the information in this guide refers to a "printer", we

mean any

type of company listed above which may be performing

manufacturing,

fabricating or processing as defined in Rule 3.300.

WHEN TEXAS SALES OR USE TAX MUST BE PAID BY THE PRINTER

(a) Purchases by a printer, publisher or related business

that are

for their on use, and which are not used for manufacturing an

item

or for sale to a customer, are taxable purchases.

Note: Printers should be particularly aware of the Use Tax

when

purchasing items from outside Texas. If the item purchased

from

outside Texas is for use by the printer, and not for resale,

or is not

to be used in manufacturing under Rule 3.300, Use Tax must be

paid.

(b) Some items are purchased by the printer both for his own

use, and

for manufacturing an item for resale to a customer. In these

cases,

the sales or use tax must be paid on the portion not used in

manufacturing, or not re-sold to a customer, but is consumed

by the printer. Such items are generally:

Labels:

Letterhead:

Office supplies:

Furniture:

Office machines:

Sponges;

Pens and pencils:

Hand tools:

Computer Disks:

Ink knives:

Janitorial supplies;

Copier paper;

FAX paper;

Repair Services:

Copier Toner;

Printer ribbons; and

Lubricants used in non-production machinery such as a fork

lift or delivery vehicle:

Personal protection devices such as goggles, aprons, gloves. etc.;

Computers and computer programs used for non-manufacturing purposes

such as estimating, bookkeeping, accounting, mailing lists, etc.

(c) Purchases of Equipment, Machinery, Repair Parts, and Accessories

Covered Under Rule 3300:

The sales tax on purchase or lease of these items has been in the

process of change. Here are the sales tax rates for purchases of

these items during calendar years:

October 1, 1993:

Tax is 50% of the State 6.25% portion of the sales tax, or

3.13% plus

local or metro sales tax.

January 1, 1994:

Tax is 25% of the State 6.25% portion of the sales tax, or

1.56% plus

local or metro sales tax.

January 1, 1995:

There is no sales tax, state, local or metro tax.

To be exempt, (or partially exempt between October 1, 1993 to December

31, 1994) an item of equipment, machinery, repair parts or accessory

must be necessary and essential to the manufacturing, processing,

fabricating or repairing of tangible personal property which is sold

to a customer as stated in The Manufacturing Exemption Rule 3.300.

(Note: See Exempt Purchases. Manufacturing Equipment (p. 1O) for

information about exempt equipment and Manufacturing Exemption,

Rule 3.300 in the Appendix.

(e) Leased and Rented Equipment Machinery, Repair Parts and Accessories:

When equipment is leased or rented under an operating lease or rental,

the lease is subject to Texas sales tax. However, equipment leased

under a financing lease which is an alternative form of financing

the purchase (such as a conditional sale lease") where the purchaser

exercises an option to purchase at the end of the lease will qualify

for the exemption provided the purchase option is exercised. If not,

the lease is taxable.

f) Wrapping and Packaging Machinery and Equipment:

If purchased by a manufacturer (printer or related business). Wrapping

and packaging equipment is exempt. However, if this equipment is

purchased by a retailer, wholesaler, produce shipper or repackager

(or anyone other than a manufacturer) wrapping and packaging equipment

is taxable.

Wrapping and Packaging Equipment includes equipment used to box, label,

fasten, cover or hold the product together.

g) Wiping Towels are taxable when purchased either as a service

or as disposable wipes.

EXEMPT PURCHASES

As a manufacturer in Texas, printers and related businesses use many

items that may be purchased tax exempt when used directly in

manufacturing, processing or fabricating by one or more of the

manufacturing processes of the industry. These items are exempt

under Rule 3.300 known as

the "Manufacturing Exemption" (see Copy, in the Appendix of this book).

a) Supplies and materials which become a part of the printed item

which is sold to a customer or which are necessary or essential to

the manufacturing process are exempt under Rule 3.300. These

include:

Paper;

Ink

Ink additives;

Varnish

Spray powder;

Printing plates

Platemaking chemicals;

Cotton pads

Offset press blankets;

Press roller covers

Toners;

Typesetting or pre-press diskettes or tapes.

Alcohol & Alcohol substitute:

Deglazers Lubricants;

Masking sheets Opaque;

Masking Tape

Film:

Film & paper processing chemicals

Proof paper:

Typesetting paper

PMT. Velox paper;

Magnetic tape (*)

Computer diskettes; (*)

Electronic printer toner (*)

Printer ribbons; (*)

Blanket wash Roller wash;

Flexographic plates

Binding staples;

Binding glue

Embossing foil;

Engraving plates

Die-cutting plates;

Embossing plates

Photoengravings.

(*) If used for typesetting or electronic pre-press on items that

will be printed and sold to a customer, or to operate exempt equipment.

(b) Manufacturing Equipment.

The following is a partial list of equipment used in the manufacturing

processes of printing that is exempt under the manufacturing exemption,

Rule 3.300, if used by a printer to manufacture, process or fabricate

items that are sold to a customer: (See phased in exemption page 8(c),

for exemptions between October 1, 1993 and December 31, 1994

)

Printing presses;Electronic Duplicators (Docutec, Indigo, Lionhart Xiecon

etc.):Copy Machines used to print copies for sale to customers:

Litho Cameras;Film, paper or plate processing equipment;

Typesetting equipment (such as hot metal typecasting machines

or phototypesetters); Electronic typesetting equipment (such as

imagesetters and computers used exclusively for setting type or

creating images for printing): Computer programs and peripheral equipment

used to operate exempt computers or equipment, Proofmaking equipment;

Platemaking equipment; Finishing equipment (such as folders, cutters,

stitchers, binding machines, gathering machines, tab cutting and

laminating machines. etc.): Bookbinding equipment used to finish a

printed piece; Mailing equipment; Machine parts or accessories for exempt

equipment.

Note: When purchasing, or leasing using a financing lease, exempt equipment

where service charges are also financed, and for which you are providing a

valid Texas Certificate of Exemption to the seller, the exemption applies to

the equipment and the service or maintenance agreement.)

Machinery or equipment installed under a lump-sum contract to improve, repair

or remodel real property is not exempt to either the contractor or manufacturer.

c) Repair Parts or accessories purchased for exempt manufacturing

equipment are exempt.

d) Items purchased from a trade service.

When these items are purchased from a trade service and are necessary,

and essential to the manufacturing process, and are used to print or

finish an item that is sold to a customer, they are exempt from Texas

sales tax provided a valid Texas Certificate of Exemption is provided

by the purchaser to the seller.

Note: The reason for the exemption should be stated on the Texas

Certificate of Exemption as "This item is necessary and essential to

the manufacturing of printing which will be sold to acustomer under Rule 3.300" )

Examples of items purchased tax exempt from a trade service and which

are necessary and essential to the manufacturing of printing include:

Typesetting Design;

Proofs

Negatives;

Color

Separations

Printing plates;

Binding

& finishing

Embossing;

Thermographing

Coating;

Die

cutting

The printer (purchaser) must provide the Trade Service

(seller) with a valid Texas Certificate of Resale if the item is to be resold

to the customer, or a valid Texas Certificate of Exemption if the item is used

in the manufacturing of a printed item that is sold to the customer.

(e) Wrapping and Packaging Materials are sales tax exempt, including:

Wrapping paper;

Mailing tubes

Shrink wrap material;

Twine or string

Bubble wrap;

Shipping boxes

Package labels;

Stationery boxes

Strapping.

(f) Copy Machines and their paper and other supplies used

exclusively by a printer or related industry company for printing copies that

are sold to customers are exempt.

g)"Brokered" Items:

Items which are purchased by the printer and are not used in

the manufacturing process, but are sold to the customer, are sales tax exempt

provided a valid Texas Certificate of Resale is provided by the purchaser to

the seller. Examples are: 5

Business forms;

Businesscards Invitations;

Labels Advertising specialties.

h) Maintenance, Maintenance Agreements, Repair Services purchased to

maintain or repair exempt equipment are exempt effective January 1, 1995

provided the purchaser provides a valid Texas Certificate Of Exemption to

the seller.

(i) Energy (electricity or gas):

Energy which is used in manufacturing, fabricating or

processing of tangible property which is sold to a customer, and is necessary

and essential to the manufacturing process, is sales tax exempt. Examples of

exempt uses of energy in the printing industry are:

Operation of printing equipment;

Operation of typesetting, pre-press or bindery/finishing equipment;

Operation of gas or electric driers on printing presses;

Operation of a hot water heater that serves the manufacturing area;

Operation of air conditioning systems which serve manufacturing areas:

Operation of lighting in pre-press, printing and finishing areas.

To claim a sales tax exemption for energy use, an Energy Use Study must be

performed and the Study certified by an electrical engineer, or a graduate

of an accredited engineering college. The Study must prove that the predominant

use (more than 50%) of energy on a meter at the facility is used for

manufacturing.

(Note: This Energy Use Study service is available from Printing Industries

of the Gulf Coast. Contact PIGC or PIA of Texas for low member rates.)

(1) If separate meters are used for production areas, all electrical use

from that meter is exempt from sales tax.

(2) If separate meters are used, one for air conditioning, another for

other uses, it must be proven that the predominant use (more than 50%)

of the energy used is for manufacturing.

(3) If a single meter is used, and the Energy Use Study proves that more

than 50% of the use is for manufacturing, then all of the

energy costs from that meter are exempt from sales tax.

(4) If your facility is located in a building with other tenants, no energy

use exemption is available unless the other tenants are exempt and an Energy\

Use Study is performed for the building: or your facility is served by its

on meter.

(Note: If your rent or lease includes utilities, no energy

use exemption is allowed)

(5) In-plant printing operations (printing operations in

non-printing industry companies and who operate as a service to the company)

are not eligible for the energy use exemption.

III. THE IN-PLANT PRINTER'S RESPONSIBILITY

The manufacturing exemption, Rule 3.300, does not apply to

in-plant printing operations. All items purchased from suppliers, manufacturers

or trade services are subject to Texas sales or use tax if the item purchased

is for use within the Company.

Items purchased for resale, or for commercial sales by an

in-plant printing operation to a customer other than the Company, are covered

under the same rules as commercial printers.

The in-plant printing department is not required to charge

Texas sales tax on intra-company sales.

IV. SALES AND USE TAX RATES

As of January 1, 1995 the Texas sales tax rate is 6.25%.

Both cities, counties and metropolitan transit authorities

may also impose additional sales taxes.

The maximum combined rate than can be charged is 8.25%.

Today's sales tax charges translate into a multiple tax rate

that is dependent upon the printer's location as well as the customer's

location.

Printers must charge the sales tax rate based on where the

customer takes possession.

To find the appropriate sales tax for the area you are

shipping to, either ask your customer what the sales tax rate is for his area

or request the book, Texas Sales & Use Tax Rates from the Texas Comptroller of

Public Accounts.

V. CLAIMING REFUNDS FOR TAXES PAID ERROR

In the event that you have paid Texas sales tax in error, you

must request a refund within forty-eight (48) months of the date the tax was

paid or reported.

There are several reasons why you are eligible to claim a

refund. These are:

(a) You performed a certified Energy Use Study that proved

that your energy bills are exempt from Texas sales tax;

(b) You have paid sales tax in error on items that are exempt;

(c) Your invoices to a customer have gone unpaid and you have

paid the sales tax on these invoices as if it were collected

There are two procedures available to you to seek a refund of

Texas sales taxes paid in error.

(1) YOU MAY REQUEST YOUR REFUND FROM THE COMPANY WHO SOLD YOU

THE EXEMPT ITEM AND COLLECTED YOUR TAX.

The company (vendor) that sold you the item and collected your tax to the

Comptroller, and remitted the tax to the Comptroller, can refund the full

amount of the tax to you and deduct the amount of the tax paid to the

Comptroller from their Sales Tax Report and payment by reducing taxable sales

figures for state and the appropriate local taxing jurisdictions (local taxes

qualify, effective 1/1/95), on a subsequent return. Using this system, there is

no need for an "Assignment of Refund" by the seller to you.

Complete the REQUEST FOR REFUND OF TEXAS SALES TAX form and send it to the

company who sold you the exempt item and collected your sales tax

You must also provide the Seller with a valid Texas Certificate of Exemption.

The company (vendor) has the right to: (a) refund the full

amount of the sales tax you paid to them or issue you a credit (and simply

deduct the amount they paid from their Sales Tax Report and payment by reducing

taxable sales figures for state and the appropriate local taxing jurisdictions

[local taxes qualify, effective 1/1/95]. on a subsequent return), or (b) refuse

to refund your sales tax. In the event that the seller refuses to refund your

sales tax, your only option is to obtain an assignment from the vendor (see

Method No. 2) and request your refund directly from the Comptroller using

Method No. 2 in this Report.

(2) YOU MAY REQUEST A REFUND DIRECTLY FROM THE TEXAS COMPTROLLER OF PUBLIC

ACCOUNTS FOR TAX REMITTED DIRECTLY TO THE STATE THROUGH YOUR SUPPLIER.

Please understand, however, that the Comptroller can only

provide a refund to the Company who paid the taxes to the Comptroller (the

company who sold you the exempt item and collected your sales tax, then

remitted to the Comptroller) unless you obtain an assignment of the refund

(use the Assignment Form).

In order to collect a refund of the tax paid to the

Comptroller by the company who sold you the exempt item and paid the tax, or

portion of the tax, to the Comptroller, you must obtain an assignment of the

refund from the company who paid it to the Comptroller. To do this:

(a) Complete the REQUEST FOR A REFUND OF TEXAS SALES TAX form and the

Exhibit 1(Schedule) form, and provide them to the company (vendor)

that collected the sales tax on your purchase along with a Certificate of

Exemption (and, attach copies of the invoices, if applicable):

(b) Have the company (vendor) you purchased the equipment from and

collected the sales tax from you complete the ASSIGNMENT OF RIGHT TO

REFUND form:

(c) Mail the completed REQUEST FOR A REFUND, Exhibit 1 (Schedule) and VENDOR'S

ASSIGNMENT to:

Revenue Accounting Division

Credits Verification Section

P. O. Box 13528

Austin, Texas 78711-3528

(512) 463-4480 or. 1-800-531-5441, ext. 3155

Note: Refund Requests submitted to the Comptroller's Office,

filed by a representative of the applicant, must include a Power of Attorney or

other written authorization.

(IMPORTANT: If you use this method you may not receive a

refund of the total amount you paid to the company who sold you the equipment

and who collected your sales tax. The Comptroller can only refund the amount of

the tax that was paid to them. Some companies receive a discount for timely

filing with the Comptroller. The discount amount retained by the company who

paid the sales tax to the Comptroller cannot be refunded by the Comptroller.)

REQUEST FOR A REFUND OF TEXAS SALES TAX

PLEASE PRINT OR TYPE

Request Made To:

Date:

COMPANY:

ADDRESS:

CITY:

STATE:

ZIP:

Our Company, named below, purchased item(s) from your company and paid

Texas Sales Tax to you (see Copies of invoice(s) and Exhibit 1 attached). However,

the item(s) we purchased from you, and which are listed on the attached Exhibit

1, are exempt from Texas Sales Tax under Rule 3.300 (Manufacturing Exemption).

We hereby request your company to please refund the amount of Texas Sales Tax

we paid to you on the following item(s) and amounts listed on the attached

Exhibit 1:

TOTAL AMOUNT OF REFUND REQUESTED IS: $

IMPORTANT INFORMATION FOR SELLER (VENDOR):

, Rule 3.325, allows you

to deduct this refund from your Sales Tax Report by reducing taxable sales

figures for state and the appropriate local taxing jurisdiction (local taxes

effective 1/1/95), on a subsequent return. Maintain this form in your files.

Or, you may use a more cumbersome method, and assign the refund requested to

thepurchaser.

THIS REQUEST FOR A REFUND IS MADE BY: (Please issue your check or credit for

the amount of the refund to:)

COMPANY:

ADDRESS:

CITY:

STATE:

ZIP:

TELEPHONE:

TAXPAYER NUMBER:

IMPORTANT: ATTACH COMPLETED EXHIBIT 1 SCHEDULE AND COPIES OF

INVOICES TO THIS FORMBEFORE SENDING TO VENDOR

HOW TO COMPLETE THE "REQUEST FOR A REFUNDOF TEXAS SALES TAX" FORM:

(1) Please print or use a typewriter to complete this form.

(2) Complete the Exhibit 1 (Schedule) form.

(3) Attach the Exhibit 1 (Schedule) form and copies of the invoices referenced

to this "Request For A Refund Of Texas Sales Tax" form and mail to the vendor

named on this form.

YOU MUST FIRST REQUEST YOUR REFUNDFROM THE VENDOR WHO COLLECTED YOUR TAX.

If the vendor refuses to provide your refund or credit, and

instead returns your Request form with a completed "Vendor's Request For Refund

and Assignment of Right To Refund" form, assigning the refund to you:

(a) attach the Assignment to your Request Form, Exhibit 1 with

copies of invoices; and,

(b) mail to:

Revenue Accounting Division

Credits Verification Division

P. O. Box 13528

Austin, Texas 78711-3528

DO NOT MAIL THE "REQUEST FOR REFUND" TO THE REVENUE

ACCOUNTING DIVISION WITHOUT THE COMPLETED EXHIBIT 1

AND THE COMPLETED "ASSIGNMENT" FORM ATTACHED.

If You Need Information Or Assistance:

If you should need information or assistance in completing this form, or

other sales tax information concerning refunds, you may contact either:

---

---

---

Revenue Accounting Division

Credits Verification Section

P.O. Box 13528

Austin, Texas 78711-3528

(512)4634545

or, toll free

1(800) 531-5441 ext. 34545

INFORMATION AND INSTRUCTIONS: For Completing Exhibit 1.

Before starting to complete this Schedule, arrange a single

vendors invoices you will be using to claim a refund in date

order.

Enter the Vendor's Name and address at the top of Exhibit

1. Use a separate Exhibit 1, for each vendor.

Separate the vendor's invoices (and enter invoice and other

information) by Tax Period section of the form. Sub-total

each Tax Period.

Enter information on this Schedule in clear printing or

typewriter.

Use additional copies of this Exhibit 1, if necessary.

THE PHASED-IN EXEMPTION

Manufacturing equipment became exempt in Texas on a

phased-in basis beginning October 1, 1993. The following

reductions apply to qualified purchases made for which

possession was taken by the purchaser during these

periods:

For October 1, 1993 through December 31, 1993, a 50%

reduction of state tax applies. There is NO reduction for

local taxes.

For January 1, 1994 through December 31, 1994, a 75%

reduction of state tax applies. There is NO reduction for

local taxes.

For January 1, 1995 and after, a 100% reduction of state

and local taxes applies. (There is NO state or local taxes.)

INSTRUCTIONS

1."INV. NO." Enter the vendor's invoice number.

2."INV. DATE" Enter the vendor's date of invoice.

3."ITEM DESCR" Enter a one word description of the

item, or if an invoice item number is shown on the invoice,

enter the invoice item number.

4."TAX PERIOD REPORTED TO STATE" Enter the tax

period to the tax was reported to the state by the vendor to

the best of your knowledge. Use the year and the period.

Example: a 9/1/89 payment date to the vendor should

place the tax period as the third quarter of 1989. This

would be entered as 89-3. (Vendor: correct if entered in

error.)

5."AMOUNT SUBJECT TO REFUND" This is the amount

of the purchase which qualifies for the refund. Enter the

dollars and cents.

6. "AMOUNT STATE TAX REFUND" Enter the amount of

the 6.25% state sales tax which is refundable based on the

phased-in manufacturing exemption shown above.

(Note: The sales tax shown on the invoice includes the

state 6.25% and may also include city, MTA/CTD and

County/SPD tax. The total will not be greater than 8.25%.

If the sales tax shown is greater than 6.25%, you must

break-out the amount of city, MTA/CTD and County/SPD

tax and enter these in the proper columns.)

7."AMOUNT CITY TAX REFUND" Enter the amount of

the sales tax which is the City tax. (Note: In Houston and

Dallas, this is 1%.)

8."CITY NAME" Enter the name of the city where sales

tax is based.

9."AMOUNT MTA/CTD TAX REFUND" Enter the

amount of the MTA/CTD tax where sales tax is based,

(Note: In Houston and Dallas, this amount is 1% )

10. "MTA/CTD NAME" Enter the name of the city where

the MTA/CTD tax is based.

11. "AMOUNT COUNTY/SPD TAX REFUND" Enter the

amount of the County or Special Purpose District where

tax is based. (Note: In Houston and Dallas, there is no

County or SPD tax.)

12. "COUNTY/SPD NAME" Enter the name of the

County or Special Purpose District where the tax is based.

13. "TOTAL TAX REFUND REQUEST" Add the

amounts you have entered in Columns 6, 7, 9, and 11.

Enter the total in this column.

OTHER INSTRUCTIONS:

1. Sub-total all amounts in each Reporting Period and in

the Total column.

2. Add the sub-total amounts in each column (5, 6, 7, 9,

13) and enter the totals in the Grand Total line.

3. ENTER THE GRAND TOTAL REFUND AMOUNT IN

THE PROPER PLACE ON THE REQUEST FOR A

REFUND OF TEXAS SALES TAX FORM.

4. ATTACH THIS EXHIBIT 1. FORM, AND COPIES OF

SUPPORTING INVOICES TO THE REQUEST FOR A

REFUND OF TEXAS SALES TAX' FORM.

5. MAIL THIS INFORMATION AND REQUEST TO THE

VENDOR .

6. ENCLOSE WITH THIS INFORMATION A VALID

TEXAS CERTIFICATE OF EXEMPTION" FORM.

INSTRUCTIONS TO VENDOR:

Review the invoices and entries on this Exhibit 1. Sched-

ule. Confirm that the entries are correct and enter

corrections where necessary.

You may (1): provide the purchaser with a check in

payment of the refund; or (2) issue the purchaser a credit

in lieu of cash payment.

If you provide the purchaser with payment or credit for

their refund, you may reduce your taxable sales and

payment to the on a

subsequent return in the amount refunded or credited by

providing a copy of the purchaser's information as shown

on the Request Form and its attached Exhibit 1. (cor-

rected by you) to the Comptroller with your subsequent

return.

If you decline to make the refund as requested: notify the

purchaser in writing and complete the "VENDOR'S

REQUEST FOR REFUND AND ASSIGNMENT OF RIGHT

TO REFUND" form; and, return the purchaser's request

and its attached information with the completed Assign-

ment form to the purchaser so that the purchaser can

obtain a refund from the State of Texas.

VENDOR'S REQUEST FOR REFUND AND PRIVATE ASSIGNMENT OF RIGHT TO REFUND

PLEASE PRINT OR TYPE

To The :

On / / (Date) a Request For A Refund Of Texas Sales Tax was

received from (enter customer's name):

on the purchase(s) of items, and in the amounts, and on the

dates specified in Exhibit 1 and copies of invoices attached.

This acknowledges that the amounts and dates are correct and

that the tax collected on

these purchases was properly remitted to the state under our

company's Taxpayer

Number____

Exact amounts remitted for State, City, County, Transit and

Special Purpose District taxes, if applicable, and reporting periods for each

remittance are provided on the attached Exhibit 1.

Assignment of Refund

The right to receive the refund from the State of Texas is

hereby assigned to:

Taxpayer

Name:

Taxpayer

Number:

as prescribed by Rule 3.325 with the understanding that only

those amounts remitted to the

State will be refunded by the State. (Discounts for timely

filing retained by the Seller are not refundable by the State). Penalty and

interest will be refunded to the assignee.)

This Assignment Is Made By:

Company Name:

Name of Person

Authorizing Assignment:

Position or Title:

Signature of person

authorizing assignment:

Area Code/Phone Number: ( ) Date:

INSTRUCTIONS TO THE PURCHASER REQUESTING AN ASSIGNMENT

Complete the Request For A Refund Of Texas Sales Tax form,

the Exhibit 1 Schedule, and attach copies of invoices and enclose a copy of

this form and send the vendor this package of information.

VENDOR: HOW TO COMPLETE THE ASSIGNMENT FORM:

The , Rule 3.325 and

Rule 3.338, allows that a company who sold items which are exempt under the

Manufacturing Exemption, Rule 3.300, and for which Texas Sales Tax was paid by

the purchaser to the seller, may refund the sales tax to the customer.

This should be done from the "Request For A Refund Of Sales

Tax" form with Exhibit 1 attached. If the Request For Refund... form and the

Exhibit 1..." form is not used, a signed letter should be attached which

includes the same information.

VENDOR: MAKING THE REFUND, OR CREDIT, AND GETTINGREIMBURSED BY THE COMPTROLLER:

The seller may issue his payments or credit to the purchaser,

then simply deduct the amount of the tax refunded (less the Comptroller's

timely payment discount. if applicable), by reducing taxable sales figures for

state and the appropriate local taxing jurisdictions (local taxes qualify for

refund after 1/1/95), on a subsequent return.

VENDOR: ASSIGNING THE REFUND TO THE PURCHASER:

The Seller may elect not to provide the requested refund or

credit to the purchaser. In this event, the Seller may assign the rights to the

refund to the Purchaser in order for the Purchaser to obtain a refund directly

from the .

To assign the refund to the Purchaser, complete the "Vendor's

Request For Refund And Private Assignment Of Right To Refund" form and attach

it to the purchaser's Request For "A Refund Of Texas Sales Tax" form with

Exhibit 1. attached and return both to the Purchaser who is requesting the

refund.

Make copies for your records and files.

VENDOR: TO COMPLETE THE ASSIGNMENT FORM:

Enter the purchaser's name who is requesting the refund and

the purchaser's taxpayer number (get this information from the Request For A

Refund... form provided to you by the purchaser).

Enter your company's name and other required information at the bottom of the form.

Review and edit the information listed in Exhibit 1. provided

to you by the purchaser, or prepare an Exhibit 1 if this information is

incorrect or incomplete. Compare these amounts to the amounts you remitted to

the Comptroller (the amount of sales tax you collected less your timely payment

discount, if applicable). The purchaser can only obtain a refund of the amount

you (the Seller) paid to the Comptroller.

Enter the exact amounts and reporting periods you reported

the sales tax to the which relates to the

shown on the Request For A Refund..." form and its Exhibit 1 forms.

INFORMATION FOR THE PURCHASER REQUESTING A REFUND:

If the Seller refuses to provide you with a refund, and

instead completes this Vendor's Request For Refund And Private Assignment Of

Right To Refund" form and returns both your Request For A Refund..." form and

its Exhibit 1 to you, attach the Assignment over the Request For A Refund..."

form and copies of the corresponding Seller's invoices.

Send the completed information to: ,

Revenue Accounting Division, Credits Verification Section, P. O. Box 13578,

Austin, Texas 78711-3528.

VI. MAINTAINING YOUR SALES TAX RECORDS

1) You must obtain a valid Texas Certificate of Resale, or a

valid Texas Certificate of Exemption from all customers who do not pay sales

tax. These Certificates should be obtained at the time of the sale. They

should be filed in the customer's account file, or in a separate Exemption or

Resale File. They must be made available to a representative of the Texas

Comptroller of Public Accounts for the purposes of a Sales and Use Tax Audit.

(2) You must have all receipts showing that you paid sales or

use tax on the purchase of equipment or any other item.

(3) All sales and use tax records must be retained for a

period of forty-eight (48) months. A five year retention schedule would be

safer. Any destruction of these records, books of accounts, invoices, receipts,

job tickets., job costing records, contracts or other supporting documents

should not be destroyed before the expiration of forty-eight months without the

written authorization of the .

VII. OTHER SALES AND USE TAX INFORMATION

(1) Creative Items (Photographs, slides, art, etc.) Purchased By A Printer Or

Related Business:

(a) and, the purchaser retains ownership;

The Purchaser must pay sales tax to the seller of the

photographs, slides or art.

b) or, the purchaser transfers ownership to the customer

The printer is exempt from paying sales tax to the seller

provided a valid Texas Certificate of Resale is provided to the Seller; the

printer must list these items separately on his invoice; and, a document

transferring ownership to the customer must be on file at the printer's place

of business.

These items, when sold to the customer, are subject to Texas

sales tax, unless the customer provides you with a valid Texas Certificate of

Resale or valid Texas Certificate of Exemption or, you ship the items to a

location outside Texas.

(2) Waste Disposal, Waste Transportation, Waste Reclamation:

Generally, charges for disposal or reclamation of

hazardous waste are exempt from Texas sales tax. However, some items used in

the storage and transportation of hazardous waste are subject to Texas sales

tax.

(a) Exempt purchases related to waste, waste transportation

and waste reclamation:

Waste disposal service;

Waste reclamation service;

Hazardous waste transportation service;

Fees or charges for participating in an industry

self-compliance program or service;

Consulting fees relating to waste management.

(b) Taxable purchases related to waste, waste management or

waste reclamation:

Hazardous waste storage containers;

Labels for hazardous waste containers;

Testing supplies and equipment;

Analytical testing services;

Safety supplies or equipment;

Charges or fees related to non-hazardous waste, non-hazardous

waste transportation,

reclamation or recycling.

(3) TeleFax Machine Services Sold To Customers:

When a printer purchases a TeleFax machine, purchases a

dedicated phone line to serve only the TeleFax machine, purchases toner, paper

and other supplies to operate the machine, and the TeleFax machine is used

exclusively to sell TeleFax service to customers for a fee:

(a) The charges made to the printer by the phone company for

the dedicated line are exempt from Texas sales tax, provided a valid

Texas Certificate of Resale is provided to the phone company by the printer;

(b) The printer must record his use of the TeleFax machine

that is not sold to a customer. The percentage of phone service, supplies and

materials used by the printer for his use is subject to either Texas Sales Tax

or the Use Tax;

(c) The sale of TeleFax service to a customer is subject to

Texas sales tax, whether a charge is made by-the-page, by time, or any other

method, unless the customer provides the Seller with a valid Texas Certificate

of Exemption;

(d) The purchase of a TeleFax machine or the rental or lease

of a TeleFax machine, is subject to Texas Sales or Use tax;

(e) The charges made to the printer for supplies and

materials to operate the TeleFax machine which is used to sell TeleFax service

to a customer, are exempt from Texas Sales or Use Tax provided the printer

provides a valid Texas Certificate of Exemption to the seller.

(Note: The reason for the exemption to be stated on the Texas

Certificate of Resale is. "Supplies or materials purchased to operate a TeleFax

machine for which service is re-sold to customers ".)

(

4) Pollution Control Equipment:

The purchase of pollution control equipment required by a

regulatory authority in connection with a particular manufacturing process is

exempt from Texas sales tax. Typical

pollution control equipment in printing related operations

includes:

Air cleaners on printing presses;

Silver recovery units;

Solvent reclamation units;

Air cleaners used to clean the air of dust or harmful odors

in the manufacturing area.

The energy (gas or electricity) used to operate the pollution

control equipment is an exempt purchase or qualify only if predominant use of

all gas or electricity qualifies.

The supplies necessary to operate the pollution control

equipment are also exempt purchases.

You must provide a valid Texas Certificate of Exemption to

the seller.

(Note: The reason for the exemption should be stated,

"Pollution control equipment required by a regulatory authority, exempt under

Rule 3.295".)

VIII. The Sales Tax Audit

There are occasions when your company will be selected for an

audit by the . Here is an anatomy of an

ordinary sales tax audit. We urge you to be helpful and cordial to the

Comptroller's representative, and to please contact your association PIGC or

PIA of Texas if you have questions, or if portions of the audit seem unusual or

contrary to the information in this book.

(1) Why Were You Selected For An Audit?

There are a number of reasons your company was selected to be

audited by the . Among the reasons are:

(a) you were a random selection;

(b) you have been audited before (usually four years ago) and

the Comptroller scheduled you for a check-up;

(c) your company is part of a targeted industry that the

Comptroller has selected for audits;

(d) discrepancies in the sales tax records of a supplier or

customer indicated that your sales tax procedures were deficient in some way.

(2) Your First Contact:

You may receive a phone call or a letter, or both from the

Comptroller's representative announcing that your company will be audited,

and setting a date and time for the initial visit. The auditor will advise you

of the time period which the audit will cover. The time period will not be more

than (48) months prior to the date the audit begins.

(3) What Will Be Discussed At The Initial Meeting:

(a) The auditor will introduce himself/herself and present

you with his (her) credentials. If valid identification is not presented, ask

to see their identification, nicely. Review it. If it does not appear to be

valid, contact the , Audit Division,

Austin, Texas and ask if the person is an auditor for the Comptroller. (Note.

There have been occasions when persons have posed as Comptroller's auditors in

order to acquire sensitive company information.)

(b) You should find a quiet, private place for the

conference. The auditor will need a desk or table in a private area to do the

work of the audit.

(c) At the initial meeting, you will need to have available

the following documents and files for the period of the audit:

General ledgers, trial balances;

Federal income tax returns;

Chart of accounts;

A current list of fixed assets;

Depreciation schedule:

Sales invoices;

Sales journals;

Resale and Exemption forms;

Sales tax returns and workpapers:

Invoices for purchases;

Accounts Payable journals:

List of customers;

List of contracts;

Job Tickets; and.

Shipping records.

(d) The auditor will want you to have the above documents and

files available for review at the initial meeting.

(e) The on-site audit will take about a week, sometimes two

weeks or more.

(f) Once the auditor completes the on-site review of your

records, the auditor will prepare a report that will state why and how much

sales tax you will owe, plus penalties and interest.

(g) Before you pay in a timely manner, it would be wise to

have these reviewed by PIGC or PIA of Texas staff to see if the auditor applied

Texas Sales and Use Tax laws and rules properly as they apply to the printing

industry.

(h) If you do not have the money to pay the tax due, you may

request that the Comptroller's office work with you for a payout over a

reasonable time.

(4) You have the right to challenge the Auditor's report to

the Comptroller, an Administrative Law Court, or in a District Court. All of

these are expensive, time consuming activities that will require the services

of a sales tax expert (accountant or attorney). In the event you choose to

appeal the Report, please contact your association, PIGC or PIA of Texas, for

assistance. Your association staff will be able to help your tax expert and may

be able to provide other assistance.

APPENDIX

The appendix of this book contains the following information and documents:

List of Other Sale & Use Tax Rules

Rule 3.300 Manufacturing Exemption

Sample "Texas Certificate of Exemption" form

(a reproducible camera-read copy)

Sample "Texas Certificate of Resale" form

(a reproducible camera-ready copy)

Note: Texas Certificate of Resale and Texas Certificate of

Exemption forms andother sales tax forms are available free to members

of PIGC or PIA of Texas.)

OTHER SALES & USE TAX RULES

In addition to Rule 3.300 issued by the Texas Comptroller of

Public Accounts, these additional Rules may be of interest to printers,

publishers and graphic arts firms. You may request a copy from the Texas

Comptroller of Public Accounts, Austin, Texas 78774.

Rule - Subject:

3.281 - Records Required, Information Required

3.285 - Sales For Resale, Resale Certificates

3.286 - Seller's Responsibilities

3.287 - Exemption Certificates

3.292 - Repair, Remodeling, Maintenance and Restoration of

Tangible Personal Property

3.299 - Newspapers, Magazines, Publishers, Sacred Writing, Broadcasters

3.202 - Accounting Methods, Credit Sales, Bad Debt, Repossessions

3.303 - Transportation, Delivery Charges

3.308 - Computers, Hardware, Software, Services and Sales

3.312 - Persons Engaged in the Graphic Arts and Related Occupations

3.314 - Wrapping, Packaging, Container, Labels

3.321 - Advertising Agencies

3.322 - Organizations Exempted (Religious, Educational, Charitable,

Athletic)

3.346 - Use Tax

3.374 - Sales Tax Imposition (city)

3.375 - Use Tax, Engaged in Business (city)

3.424 - Sales Tax Imposition (MTA)

3.425 - Use Tax, Engaged in Business (MTA)

NOTE: Previous Accession Number 9506180L