WSR 05-03-052

PERMANENT RULES

DEPARTMENT OF REVENUE


[ Filed January 11, 2005, 4:01 p.m. , effective July 1, 2005 ]


Purpose: WAC 458-20-144 (Rule 144) discusses the business and occupation (B&O) and retail tax reporting responsibilities of persons engaged in printing activities. The instructions regarding amounts charged for postage costs have been modified to identify the Washington state statutory provisions to be used to determine whether such amounts are included or excluded from the measure of tax, and to refer the reader to WAC 458-20-111 for information about nontaxable advances and reimbursements. Language has also been added to refer persons who engage in duplicating activities to WAC 458-20-141 Duplicating activities and mailing bureaus.

Citation of Existing Rules Affected by this Order: Amending WAC 458-20-144 Printing industry.

Statutory Authority for Adoption: RCW 82.32.300 and 82.01.060(2).

Adopted under notice filed as WSR 04-19-080 on September 17, 2004.

Changes Other than Editing from Proposed to Adopted Version: We have made a change to more clearly explain that the statutory definition of delivery charges includes postage. The change also provides the information in an active voice, updates terminology to recognize current business practices, and refers the reader to Rule 111 for additional information.

The language in the proposed rule is as follows (language proposed for removal reflected in strike out with proposed new language underlined):

RCW 82.04.070 and 82.08.010, respectively, define "gross proceeds of sales" and "selling price to include "delivery costs." Where stamped envelopes or government postals are purchased and printed for customers or where stamps are provided, the amount of the postage ((may be deducted from the total charge to the customer in determining the selling price for business tax and sales tax)) is included in or excluded from the measure of B&O or retail sales tax consistent with these statutes and any other provisions of chapters 82.04 and 82.08 RCW.

The language being adopted is as follows (language being removed reflected in strike out with adopted new language underlined):

((Where stamped envelopes or government postals are purchased and printed for customers or where stamps are provided, the amount of the postage may be deducted from the total charge to the customer in determining the selling price for business tax and sales tax.)) RCW 82.04.070 and 82.08.010, respectively, define "gross proceeds of sales" and "selling price." These definitions provide that there is no deduction for "delivery costs." RCW 82.08.010 further provides that there is no deduction for "delivery charges," a term also defined by the statute to include postage. If a printer purchases stamps, applies metered postage using its meter account, or applies its permit imprint, and also charges the customer for the postage, the charge is included in the measure of B&O and/or retail sales tax, unless excluded by another provision of chapters 82.04 and 82.08 RCW. See also WAC 458-20-111 for information about nontaxable advances and reimbursements.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 0, Amended 0, Repealed 0.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 1, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 0, Repealed 0.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 0, Amended 1, Repealed 0.

Date Adopted: January 11, 2005.

Janis P. Bianchi, Manager

Interpretations and

Technical Advice Unit

OTS-7724.2


AMENDATORY SECTION(Amending Order ET 70-4, filed 6/12/70, effective 7/12/70)

WAC 458-20-144   Printing industry.   (((Note: This rule contains the material previously included in WAC 458-20-145 which is not currently incorporated in WAC 458-20-141.))) (1) Introduction. This rule discusses the taxability of the printing industry. For information on the taxability of mailing bureau services, refer to WAC 458-20-141, Duplicating industry and mailing bureaus.

(2) Definition. The phrase "printing industry" includes letterpress, offset-lithography, and gravure processes as well as multigraph, mimeograph, autotyping, addressographing and similar activities.

(3) Business and occupation tax. Printers are subject to the business and occupation tax under the printing and publishing classification upon the gross income of the business.

(4) Retail sales tax. The printing or imprinting of advertising circulars, books, briefs, envelopes, folders, posters, racing forms, tickets, and other printed matter, whether upon special order or upon materials furnished either directly or indirectly by the customer is a retail sale and subject to the retail sales tax, providing the customer either consumes, or distributes such articles free of charge, and does not resell such articles in the regular course of business. The retail sales tax is computed upon the total charge for printing, and the printer may not deduct the cost of labor, author's alterations, or other service charges in performing the printing, even though such charges may be stated or shown separately on invoices.

((Where stamped envelopes or government postals are purchased and printed for customers or where stamps are provided, the amount of the postage may be deducted from the total charge to the customer in determining the selling price for business tax and sales tax.)) RCW 82.04.070 and 82.08.010, respectively, define "gross proceeds of sales" and "selling price." These definitions provide that there is no deduction for "delivery costs." RCW 82.08.010 further provides that there is no deduction for "delivery charges," a term also defined by the statute to include postage. If a printer purchases stamps, applies metered postage using its meter account, or applies its permit imprint, and also charges the customer for the postage, the charge is included in the measure of B&O and/or retail sales tax, unless excluded by another provision of chapters 82.04 and 82.08 RCW. See also WAC 458-20-111 for information about nontaxable advances and reimbursements.

Sales of printed matter to advertising agencies who purchase for their own use or for the use of their clients, and not for resale in the regular course of business, are sales for consumption and subject to the retail sales tax.

Sales of tickets to theater owners, amusement operators, transportation companies and others are sales for consumption and subject to the retail sales tax. Such tickets are not resold by the theater owners or amusement proprietors as tangible personal property but are used merely as a receipt to the patrons for payment and as evidence of the right to admission or transportation.

Sales of school annuals and similar publications by printers to school districts, private schools or student organizations therein are subject to the retail sales tax.

Sales by printers of books, envelopes, folders, posters, racing forms, stationery, tickets and other printed matter to dealers for resale in the regular course of business are wholesale sales and are not subject to the retail sales tax.

Charges made by bookbinders or printers for imprinting, binding or rebinding of materials for consumers are subject to the retail sales tax.

Sales to printers of equipment, supplies and materials which do not become a component part or ingredient of the finished printed matter sold or which are put to "intervening use" before being resold are subject to the retail sales tax. This includes, among others, sales of fuel, furniture, lubricants, machinery, type, lead, slugs and mats.

Sales to printers of paper stock and ink which become a part of the printed matter sold are sales for resale and are not subject to retail sales tax.

(5) Commissions and discounts. There is a general trade practice in the printing industry of making allowances to advertising agencies of a certain percentage of the gross charge made for printed matter ordered by the agency either in its own name or in the name of the advertiser. This allowance may be a "commission" or may be a "discount."

A "commission" paid by a seller constitutes an expense of doing business and is not deductible from the measure of tax under either business and occupation tax or retail sales tax. On the other hand, a "discount" is a deduction from an established selling price allowed to buyers, and a bona fide discount is deductible under both these classifications.

In order that there may be a definite understanding, printers, advertising agencies and advertisers are advised that tax liability in such cases is as follows:

(((1))) (a) The allowance taken by an advertising agency will be deductible as a discount in the computation of the printer's liability only in the event that the printer bills the charge on a net basis; i.e., less the discount.

(((2))) (b) Where the printer bills the gross charge to the agency, and the advertiser pays the sales tax measured by the gross charge, no deduction will be allowed, irrespective of the fact that in payment of the account the printer actually receives from the agency the net amount only; i.e., the gross billing, less the commission retained by the agency. In all cases the commission received is taxable to the agency.

((Revised June 1, 1970.))

[Order ET 70-4, 458-20-144 (Rule 144), filed 6/12/70, effective 7/12/70.]

Washington State Code Reviser's Office