Wis. Admin. Code Department of Revenue Tax 11.70
Examples:
The charges by the advertising agency for the production of preliminary artwork for all 10 ideas are subject to tax, provided an exemption does not apply to the sale of the finished artwork, because one idea was selected and was used to produce finished artwork.
The charge by the agency for the demo is subject to tax. The demo is preliminary artwork. Since finished artwork was produced from the preliminary artwork, the charge is subject to tax, unless an exemption applies to the sale of the finished artwork.
Examples:
The entire charge to Company C by the advertising agency for the flyers, which includes preliminary artwork, finished artwork, and the flyers, is subject to tax.
Ten percent of the total charge to Company C by the advertising agency for the flyers, including the preliminary artwork, finished artwork, and flyers, is subject to tax.
The entire charge by the advertising agency for the production of the master tape and dubs is subject to tax.
Fifty percent of the entire charge by the advertising agency for the production of the master tape and dubs is subject to tax. The remaining 50% is not subject to tax because that portion of the sale took place outside Wisconsin.
Example: Company E contracts with an advertising agency for an ongoing advertising campaign. The agency submits several suggestions, in the form of preliminary artwork, for a spring advertising campaign. These ideas are rejected by Company E. The charge by the advertising agency for preliminary artwork not chosen for further development is not subject to tax, because the preliminary artwork was not developed into finished artwork.
Example: Company F contracts with an advertising agency to have 10,000 advertising flyers produced. The advertising agency prepares preliminary artwork. Company F decides on one theme and the finished artwork is produced. The advertising agency has the flyers printed and delivered to Company F. Company F mails the flyers to its customers located outside Wisconsin.
The entire charge to Company F by the advertising agency for the flyers, which includes preliminary artwork, finished artwork, and the flyers, is exempt from tax because the printed advertising material is transported outside Wisconsin by Company F for use by Company F outside Wisconsin.
Example: Company A contracts with an advertising agency to have 5,000 catalogs that advertise Company A's products produced. The advertising agency has the catalogs printed. Some of the catalogs are delivered to Company A in Wisconsin and other catalogs are shipped directly to Company A's prospective customers in and outside Wisconsin.
The entire charge to Company A by the advertising agency for the catalogs, which includes any charges for preliminary artwork, finished artwork, and the catalogs, is exempt from tax because catalogs and the envelopes in which they are mailed are exempt from tax, regardless of whether the catalogs are delivered in or out of Wisconsin.
Example: Company G contracts with an advertising agency to produce an advertising flyer. The advertising agency prepares preliminary artwork. Company G decides on one theme, and the finished artwork is prepared. Company G provides the finished artwork, paper, and ink to a Wisconsin printer who prints 10,000 copies of the flyer. The flyers are mailed by Company G to addresses outside Wisconsin.
The charge to Company G by the printer for the printing of the flyers is exempt from tax because the flyers are transported outside Wisconsin for use outside Wisconsin by Company G for advertising purposes.
Example: Company H has an advertising agency produce specification sheets for Company H's products. The specification sheets are included with the products when sold to Company H's customers. The advertising agency produces the finished artwork and has the printing done. Company H receives an itemized bill from the advertising agency which shows a charge for the finished artwork and the printing.
The entire charge by the advertising agency to Company H is exempt from tax because the specification sheets are included with Company H's products which will be sold to customers. Company H may claim a resale exemption for the specification sheets by providing the agency with a properly completed exemption certificate claiming resale.
Examples:
The charge to Company I by the advertising agency for the preliminary artwork and finished artwork is exempt from Wisconsin sales tax because the finished artwork is consumed in the production of flyers which are sold by the printer to Company I.
The charge to Company I by the Wisconsin advertising agency for the preliminary artwork and finished artwork is subject to Wisconsin sales tax. The printer is selling a printing service, and not tangible personal property or an item or property under s. 77.52(1) (b) or (c), Stats., to Company I. The destined for sale requirement is not met and exemption from tax does not apply. Even though Company I is furnishing a printing service, however, it is still considered to be engaged in manufacturing, and its machinery and equipment, if used exclusively and directly in manufacturing, qualify for exemption under s. 77.54(6) (am) 1, Stats.
Example: Company J contracts with an advertising agency to produce a shoppers guide advertisement. The advertising agency produces layouts and roughs for approval by Company J. Company J approves, and the finished artwork for the shoppers guide advertisement is produced. The preliminary artwork and finished artwork charges are billed to Company J for the job. Company J deals directly with the shoppers guide publisher to run the advertisement in a shoppers guide. The advertising agency bills Company J $1,000 for preliminary artwork and $3,000 for finished artwork.
The total $4,000 charge is exempt from Wisconsin sales or use tax because the preliminary artwork results in finished artwork and the finished artwork becomes an ingredient or component part of a shoppers guide, or is consumed or loses its identity in the manufacture of shoppers guides.
Example: An advertising agency produces finished artwork to be used on Company K's shipping boxes. The boxes are used by Company K to ship its products to its customers. The advertising agency delivers the finished artwork to a printer who uses the finished artwork to print and produce the boxes which the advertising agency resells to Company K.
The entire charge for the finished artwork and boxes is exempt from Wisconsin sales or use tax because the boxes are used by Company K in packing, packaging, or shipping merchandise to customers. Company K should provide the agency with a properly completed exemption certificate.
Example: Company A, located in Wisconsin, publishes flyers it gives away to potential customers. Company A purchases paper from a company who delivers it to a Wisconsin printer that prints the flyers for Company A. The flyers are transported and used solely outside Wisconsin.
The paper purchased by Company A for the flyers is exempt from Wisconsin sales or use tax.
Example 1: Company B, located in Wisconsin, contracts with a printer to have 10,000 advertising flyers that are designed to promote Company B's products printed. Once the printer finishes printing the advertising flyers, the printer mails the flyers to the addresses on a mailing list provided by Company B. The addresses are in and outside Wisconsin. The charge by the printer to Company B is exempt from Wisconsin sales and use tax since the advertising flyers are advertising and promotional direct mail.
Example 2: Same as Example 1, except the flyers are sent by the printer to Company B, the purchaser, and Company B mails the flyers to the addresses on the mailing list. The flyers are not advertising and promotional direct mail because the seller/printer is not delivering the flyers to a mass audience or to addresses on a mailing list at the direction of the purchaser.
Example: An agency's billing to a client in Minnesota for finished artwork transferred to a business in Wisconsin is taxable.
Example: Company L is an advertising agency. Company L purchases various art equipment such as paint brushes, easels, etc., that it uses in its operations. A portion of the art equipment is sold to the general public for use. The art equipment Company L sells to the general public may be purchased by Company L without Wisconsin sales or use tax as property for resale, provided Company L gives its supplier a properly completed exemption certificate claiming resale.
Example: Company M is an advertising agency that produces displays for customers. The displays are usually framed or matted photographs or prints. Company M may purchase the frames, matting, and paper for photographs and prints without Wisconsin sales or use tax as property for resale, provided it gives its supplier a properly completed exemption certificate claiming resale.
Example: Company N purchases various office equipment, such as typewriters, computers, tables and cabinets which it uses in its advertising agency office. Company N purchases the equipment from an out-of-state supplier that is not required to collect Wisconsin sales or use tax. Company N is subject to Wisconsin use tax on its purchase of the office equipment.
Wis. Admin. Code Department of Revenue Tax 11.70
Note: Exemption certificates and their instructions may be obtained free of charge from the department's web site at www.revenue.wi.gov, by writing to Wisconsin Department of Revenue, P.O. Box 8902, Madison, WI 53708-8902, or by calling (608) 266-2776.
Note: Section Tax 11.70 interpretss. 77.51(1f), (1fr), (3rm), (14) (intro.) and (h), 77.52 (1) and (2), 77.522, 77.54 (2), (2m), (6) (am) 2., (25), (25m), (43), and (59), and 77.585 (8), Stats.
The interpretations in s. Tax 11.70 are effective under the general sales and use tax law on and after September 1, 1969, except: (a) The exemption for printing or imprinting of tangible personal property furnished by customers and used out-of-state for advertising became effective March 1, 1970; (b) The exemption for printed advertising material used out-of-state became effective May 21, 1972; (c) The exemption for ingredients or components of shoppers guides, newspapers, and periodicals became effective July 7, 1983; (d) The sales and use tax exemption for raw materials for printed materials transported and used solely outside Wisconsin became effective December 1, 1997, pursuant to 1997 Wis. Act 27; (e) The exemption for catalogs and their mailing envelopes became effective April 1, 2009, pursuant to 2007 Wis. Act 20; (f) The provision that items must be consumed exclusively and directly by a manufacturer in manufacturing property or items destined for sale became effective August 1, 2009, pursuant to 2009 Wis. Act 28; (g) The definitions of bundled transaction and finished artwork became effective October 1, 2009, pursuant to 2009 Wis. Act 2; (h) The change of the term "gross receipts" to "sales price" and the separate impositions of tax on coins and stamps sold above face value under s. 77.52(1) (b), Stats., certain leased property affixed to real property under s. 77.52(1) (c), Stats., and digital goods under s. 77.52(1) (d), Stats., became effective October 1, 2009, pursuant to 2009 Wis. Act 2; (i) The definition of "direct mail" became effective October 1, 2009 pursuant to 2009 Wis. Act 2; (j) The definition of "advertising and promotional direct mail" became effective May 27, 2010, pursuant to 2009 Wis. Act 330; (k) The sales and use tax exemption for advertising and promotional direct mail became effective July 1, 2013, pursuant to 2011 Wis. Act 32; and (L) Services resulting in advertising and promotional direct mail were excluded from taxable services effective July 1, 2013, pursuant to 2013 Wis. Act 20.