October 20, 1983

You ask whether the charges imposed by a printer for printing a corporate "newsletter" and a corporate annual report are subject to the sales tax.

You state that an advertising agency will design and edit the newsletter and the annual report for a corporation, and pay the printer to print them.

The newsletter will be a four-page publication distributed to the corporation's shareholders and employees at quarterly intervals. It will include reports of the corporation's economic performance and information about the corporation's products and about major personnel changes within the corporation.

The annual report will provide financial information about the corporation. It will be distributed to shareholders of the corporation and to other interested persons.

General Laws Chapter 64H, Section 6(m) exempts sales of newspapers and magazines from the sales tax. The Supreme Judicial Court has held that this exemption applies to the printing of a paper distributed free of charge at stated, periodic intervals and containing matters of interest to a significant segment of the public. Greenfield Town Crier, Inc. v. Commissioner of Revenue, 385 Mass. 692 (1982).

The Department of Revenue's sales and use tax regulation on advertising agencies (830 CMR 64H.05) provides in Division (1)(a):

"When an advertising agency or artist purchases items for resale to clients or others in the regular course of business, it may give a resale certificate, and must collect a tax at the time of resale.

Sales to an advertising agency as true agent for its client are not sales for resale to the client. The vendor generally must collect a tax on such sales to an agency, but no tax applies to the transfer from the agency to its clients."

The regulation further provides that an advertising agency is not acting as true agent when it provides consultation, creative services, or supervision of employees in connection with the production of tangible personal property (830 CMR 64H.05(1)(c)(3)).

In determining the sales price on which the sales tax is based, no deduction may be taken on account of service costs or other expenses, and the amount paid for any services that are a part of a sale must be included (G.L. c. 64H, § 1(14).

Based on the foregoing, it is ruled that:

1. The printer's sale of the printed materials to the advertising agency for resale to its client will not be subject to the sales tax.

2. The advertising agency's entire charge to the corporation for the "newsletter" and the annual report will be subject to the sales tax, including any amounts attributable to designing and editing the printed materials, and any amount that may be broken out as an "agency fee".

Very truly yours,

/s/Ira A. Jackson

Ira A. Jackson
Commissioner Revenue

IAJ:JXD:mf

LR 83-86