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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
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100.0000 Advertising Agencies, Commercial Artists and Designers—Regulation 1540
Annotation 100.0035
(a) In General
100.0035 Service or Sale. Taxpayer produces and distributes an annual catalog of over 100,000 periodicals, newspapers, annuals, etc., to public, corporate, and academic libraries, who are the taxpayer's potential customers. Customers desiring to buy or subscribe to publications listed in the catalog place their orders with taxpayer, who then places orders with the appropriate publishers. The merchandise is shipped directly to customers by publishers and the taxpayer is billed by the publisher. Taxpayer bills the customers for the standard cost of the merchandise plus a service charge. Any ancillary charges or credits originating with the publishers, such as discounts or sales taxes, are passed on to the customer by the taxpayer.
Based on these facts, the transactions do not result in the performance of a service, but rather are purchases on the taxpayer's own behalf, for resale to its customers, unless it can be clearly established that it is acting as an agent of a customer in any given acquisition. To establish the existence of an agency relationship, the taxpayer must inform the publisher of the name of the client for whom the purchase is being made; must previously obtain written evidence of the agency relationship; bill the client for the same price as billed by the publisher, and may not issue a resale certificate. 12/19/91.