Is a line drawing sold to a t-shirt manufacturer, for use in its manufacturing process, taxable as graphic artwork, or can the seller accept an exemption certificate instead?

Plain-English summary

An artist or graphics seller asked whether a line drawing sold to a shirt manufacturer is taxable. The Comptroller confirmed that graphic artwork is generally taxable under Rule 3.312 -- but with a key exception here: because the artwork is being sold to a MANUFACTURER who will use it in its manufacturing process (presumably to produce printed t-shirts), the seller may accept a manufacturing exemption certificate under Rule 3.300(b)(3) in lieu of collecting sales tax on the sale.

What this means for you

Graphic artists and designers selling artwork to manufacturers

If your artwork buyer is a manufacturer who will use the piece as an input to its manufacturing process (like artwork used to print shirts), you can accept a manufacturing exemption certificate under Rule 3.300(b)(3) instead of charging sales tax -- even though graphic artwork sales are normally taxable under Rule 3.312.

Manufacturers buying custom artwork

You can furnish a manufacturing exemption certificate to your artwork vendor when the art will be used in your manufacturing process, avoiding sales tax on that purchase.

Accountants and tax professionals

This is a short, clean example of the manufacturing exemption reaching a graphic-arts input (not just machinery/equipment) -- useful whenever a manufacturing client buys custom artwork, designs, or similar creative inputs used directly in production.

Common questions

Q: Is graphic artwork generally taxable in Texas?
A: Yes, per this letter, under Rule 3.312.

Q: Can a seller avoid charging tax when artwork is sold to a manufacturer for use in production?
A: Yes, per this letter -- the seller may accept a manufacturing exemption certificate under Rule 3.300(b)(3) instead of collecting tax.

Citations and references

Statutes and rules:

• 34 Tex. Admin. Code Rule 3.312 (graphic arts services)
• 34 Tex. Admin. Code Rule 3.300(b)(3) (manufacturing exemption certificate)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9704358L

Original ruling text

April 21, 1997

Dear ***:

Thank you for your recent letter. You asked if a line drawing you sell to a
shirt manufacturer is taxable.
Generally speaking, graphic artwork is taxable. Please refer to Rule 3.312.
However, because you are selling the artwork to a manufacturer who will use the
artwork in a manufacturing process, you may accept an exemption certificate in
lieu of collecting tax. Please refer to Rule 3.300(b)(3).
This opinion is based on the facts presented. If there are any additional or
different facts, the opinion may change.
You may call me toll free at 1-800-531-5441, ext. 5-0037. The direct line is
512/475-0037. You also may write to Sales Tax Policy Division, Comptroller of
Public Accounts.
Sincerely,
Lindey Osborne
Sales Tax Policy Division