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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
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375.0000 Motion Pictures—Regulation 1529
Annotation 375.1303
(b) On and After September 22, 1988
(1) Generally
375.1303 Video/TV Advertisement. A taxpayer who is a design and marketing company contracts to produce a video/TV ad for a client. The taxpayer utilizes the services of its own employees and/or third parties to produce "raw film" ("work print") for the ad. Included in the services performed by the taxpayer are shooting film by a camera crew and producing stock shots and sound and/or music recording. The taxpayer then ships the final version of the advertisement to the television or cable entity which will run it. No transfer of possession or title to any other tangible personal property is made by the taxpayer to the client or to the television or cable entity. In some instances, the client may directly purchase the advertising placement from the media or in some instances the taxpayer may purchase the placements.
Under Regulation 1529(b)(2)(A), the taxpayer or the third party is performing qualified production services and, as such, it is the consumer of any tangible personal property used in the performance of the services. Sales or use tax applies to purchases of tangible personal property used by the taxpayer or the third party in performing qualified production services. Since the advertisement is a qualified motion picture, tax does not apply to taxpayer's charges to the client for a single final version of the ad. However, any charges for the manufacturing of copies for exhibition to the public are subject to tax because such copies are defined as "release prints" under Regulation 1529(d)(11). 11/19/96.