Persons Engaged In Advertising

Sections 63-3612, 63-3613, 63-3621, 63-3622, 63-3622S, Idaho Code 01. In General. Advertising agencies, television stations, radio stations, graphic artists, and other persons engaged in advertising may be engaged in either the rendering of professional services or the sale of tangible personal property or both. When such persons are engaged in the sale of tangible personal property, they are retailers and are to collect and remit sales tax on the property sold. When such persons are engaged in the rendering of professional services, no sales tax applies to the service. Whether the sale is a sale of professional services or of tangible personal property is determined by the object of the transaction, i.e., is the object sought by the buyer the service per se or the tangible personal property produced by the service. Determining whether the sale is a sale of professional services or of tangible personal property is a question of fact is determined in view of all the facts and circumstances of each transaction. (7-1-26) 02. Media Advertising and Advertisements. Media advertising is the use of mass media as a means by which to reach a wide audience, viewers, listeners, or readers, with an advertisement to promote a product, service, issue, or personality. Mass media is defined as radio, television, cable television, newspapers, periodicals, trade journals, or other such media which can reach a mass audience with an identical message. The object sought by the buyer purchasing media advertising is the intangible professional service of the seller. The sale of media advertising is a sale of professional service and is a nontaxable transaction. The transfer of tangible personal property is inconsequential to the services rendered. (7-1-26) a. Radio and television advertisement. Sales tax doesn’t apply to the amount charged to produce or create advertisements which are to be broadcast by a radio or television station. It makes no difference whether the producer or creator sends the advertisement directly to the broadcast facility or to the advertiser, who in turn distributes the commercial to a broadcast facility. (7-1-26) b. Radio and television dubs. Charges for dubs which are produced from a master copy of a radio or television commercial or broadcast are not taxable so long as they are for distribution to other broadcasting facilities. Sales tax will apply to the sale of radio or television commercial or broadcast dubs which are not for distribution to a broadcast facility and are sold to a customer for another use. The measure of the tax will be the total price charged for the copies. (3-31-22) c. Magazine, newspaper, and periodical advertisements. Sales tax doesn’t apply to the amount charged to a customer to produce camera ready artwork, veloxs, and other forms of artwork which are to be reproduced in and distributed as part of a mass media publication, such as magazines, newspapers, trade journals, and periodicals. (7-1-26) IDAHO ADMINISTRATIVE CODE IDAPA 35.01.02 State Tax Commission Idaho Sales & Use Tax Administrative Rules Section 055 Page 32 d. Print media advertisement copies. Sales tax will apply to charges for reprints of a print media advertisement sold to a customer. The measure of the tax will be the price charged for the reprints. (3-31-22) 03. Sales of Non-Media Advertising. Non-media advertising is any form of advertising which doesn’t use the mass media in reaching the targeted audience, such as posters, brochures, pamphlets, handbills, displays, business forms, stationery, business cards, key chains, cups and glasses, pens, pencils, t-shirts, and other similar items. The object sought by the buyer is the tangible personal property. If the advertising agency is the agent of its client, the sale is between the supplier of the tangible personal property and the client and is taxable based on the price charged by the supplier to the client. If the advertising agency isn’t the agent of its client, then the purchase from the supplier is for resale. The sale from the agency to its client is a retail sale and is subject to tax based upon the entire amount charged to the customer by the advertising agency, including separately stated fees for: (7-1-26) a. Artwork produced by the advertising agency, including all materials, design fees, and labor to develop and produce the artwork, lettering, and designs used in the finished non-media advertising. (3-31-22) b. Artwork, lettering, and designs purchased from a graphic artist. (3-31-22) c. Photographs, negatives, and other similar items whether purchased from a commercial photographer or produced in-house by the advertising agency. (3-31-22) d. Professional modeling fees. (3-31-22) e. Printing charges, whether printed by the advertising agency or a commercial printer, including any markup or service charge. (3-31-22) f. All other charges to the customer for services agreed to be rendered by the advertising agency as part of the sale of non-media advertising. (3-31-22) 04. Sale of Custom Made Audio-Visual Films and Audio Recordings. A custom made audio-visual film or audio recording is a film or recording whose intended purpose isn’t for media advertising. Items of custom audio recordings include those to be used with a slide show presentation, designed to be played alone for information purposes or in-store advertising, or other similar purposes. Items of custom films are safety films, training films, filmed newsletters, in-store audio-visual advertising, and other audio-visual films not sold for media advertising. (7-1-26) a. The object of the buyer is to obtain the tangible personal property. The fact that the charge for the tangible personal property, the film or recording, is principally derived from labor or creativity of the maker of the property doesn’t transform the sale of the tangible personal property into a sale of services. (7-1-26) b. If the advertising agency is the agent of its client, the sale is between the supplier of the tangible personal property and the client and is taxable based on the price charged by the supplier to the client. If the advertising agency isn’t the agent of its client, then the purchase from the supplier is for resale. The sale from the agency to its client is a retail sale and is taxable based upon all charges for copy writing, directing, producing, photographing, acting, vocal artists, recording, editing, mixing, and other similar charges to produce a finished film or audio recording. (7-1-26) 05. Sales of Design Services. Determining whether design fees are taxable will depend on the object of the transaction. A fee charged to a customer for creation and design of a logo, product or business trademark, letterhead, or similar item which doesn’t involve the transfer of tangible personal property beyond that which is to convey the design to the customer, is a sale of services and isn’t taxable. When design fees are services agreed to be rendered as a part of the sale of tangible personal property, sales tax will apply to the design fee. Tax doesn’t apply to such fees when an agency acts as an agent. See Subsection 055.07.e. (7-1-26) 06. Purchases by Advertising Agencies, Graphic Artists, and Similar Operations. Persons engaged in advertising and graphic artists may provide both nontaxable services and taxable sales of tangible personal property. (3-31-22) IDAHO ADMINISTRATIVE CODE IDAPA 35.01.02 State Tax Commission Idaho Sales & Use Tax Administrative Rules Section 056 Page 33 a. When providing nontaxable services, including producing media advertising and providing design services which don’t involve the sale of tangible personal property, the agency/artist pays tax on purchases of: Art supplies, such as poster board, paper products, inks, letters, and paints; amount charged by others to produce veloxs, negatives, lithographic plates, electrotype, and other such items; photographic work; prerecorded music and sounds; and props, costumes, and backdrops. (7-1-26) b. When engaged in the retail sale of tangible personal property, such as the sale of non-media advertising items, custom films, custom audio recordings, or printed goods, the producer/agency/artist, when purchasing tangible personal property to be incorporated into the product for resale, may provide vendors with a properly executed resale certificate. See Section 128. Items considered to be directly incorporated into the product for resale include purchases of: Art supplies such as poster board, paper products, inks, letters, and paints; amounts charged by others to produce veloxs, negatives, lithographic plates, electrotype, and other such items; photographic works; prerecorded sounds and music; and printing charges. (7-1-26) c. Rental of recording or production studios and equipment. Sales tax will apply to the rental of a recording studio, audio-visual production studio, recording equipment, and audio-visual production equipment, when the owner of the equipment doesn’t furnish the personnel to operate the equipment and relinquishes total operational control of the equipment. A taxable rental also occurs if the studio personnel merely render incidental services such as maintenance and repair. No sales tax will apply to the rental of a recording studio, audio-visual production studio, recording equipment, and audio-visual production equipment when the personnel to operate the equipment is furnished with the rental of the equipment. (7-1-26) 07. Examples. Available at Sales and Use Tax Examples. (7-1-26)