Publication 235 (N.4/12) Recycled Paper Table of Contents Page I

Home , Sales, Sales (accounting)

State of Wisconsin Department of Revenue Important Changes • Menominee County tax begins April 1, 2020 • Baseball stadium district tax ends March 31, 2020 • Outagamie County tax begins January 1, 2020 • Calumet County tax begins April 1, 2018 • Brown County tax begins January 1, 2018 • Kewaunee County tax begins April 1, 2017 • Sheboygan County tax begins January 1, 2017 • Brown County football stadium tax ended

September 30, 2015

Advertising Companies

How Do Wisconsin Sales and Use Taxes Affect Your Operations?

Printed on Publication 235 (N.4/12) Recycled Paper Table of Contents Page I. INTRODUCTION...... 1 II. OBTAINING A SELLER'S PERMIT AND FILING RETURNS ...... 1 A. Who Must Obtain a Seller's Permit ...... 1 B. When Should You Apply For a Seller's Permit? ...... 1 C. Obtaining a Seller's Permit and Filing Returns ...... 1 III. WHAT IS TAXABLE? ...... 1 I V. WHERE A SALE TAKES PLACE - "SOURCING RULES" ...... 2 V. SALES BY ADVERTISING COMPANIES ...... 3 A. Taxable Sales ...... 3 B. Nontaxable Sales ...... 3 VI. SPECIFIC PRODUCTS AND THEIR EXEMPTIONS ...... 4 A. Preliminary Artwork and Finished Artwork ...... 4 1. Preliminary Artwork ...... 4 2. Finished Artwork ...... 5 3. Examples of Preliminary Artwork and Finished Artwork ...... 5 4. Exemptions ...... 6 B. Printed Materials ...... 8 1. Exemption for Newspapers, Periodicals, Shoppers Guides, and Controlled Circulation Publications ...... 9 2. Exemption for Printed Advertising Materials ...... 11 3. Exemption for Raw Materials Used in Printed Materials ...... 12 4. Exemption for Catalogs and their Mailing Envelopes ...... 13 5. New Exemption for Advertising and Promotional Direct Mail (will become effective on July 1, 2013)...... 14 C. Advertising Signs ...... 15 D. Design Services, Including Web Site Design ...... 16 E. E-Mail Blasts and Text Marketing, Management of Social Media Web Sites, and E-Newsletters17 1. E-Mail Blasts and Text Marketing ...... 17 2. Managing Social Media Web Sites ...... 17 3. E-Newsletters ...... 18 4. Charges That Are Separate and Optional...... 18 5. When Does a Sale of E-Blasts, Text Marketing, and E-Newsletters Take Place in Wisconsin? ...... 19 F. Radio and Television Commercials ...... 19 VII. PURCHASES BY AN ADVERTISING COMPANY ...... 23 A. Purchases of Items Used By an Advertising Company ...... 23 B. Don't Forget Use Tax! ...... 23 C. Purchases of Items Which Are Sold to Customers ...... 23 VIII. WHERE A SALE TAKES PLACE - DIRECT MAIL ...... 23 IX. DO YOU HAVE QUESTIONS OR NEED ASSISTANCE? ...... 27 X. BUSINESS DEVELOPMENT ASSISTANCE – WISCONSIN ECONOMIC DEVELOPMENT CORPORATION ...... 27

Advertising Companies

I. INTRODUCTION II. OBTAINING A SELLER'S PERMIT AND FILING RETURNS This publication explains how Wisconsin state sales and use taxes affect advertising companies. A. Who Must Obtain a Seller's Permit

Sales and purchases by advertising companies that Every individual, partnership, corporation, or other are subject to the 5% state sales or use tax may also organization making taxable sales in Wisconsin, be subject to the (1) 0.5% county sales or use tax, regardless of whether its sales are mercantile in (2) 0.1% baseball stadium sales or use tax, nature, is required to have a seller’s permit. See (3) 0.5% football stadium sales or use tax, and Part III. for “What is Taxable?” (4) local exposition taxes. Additional information about these taxes is contained in the following: B. When Should You Apply For a Seller's Permit? (1) County tax: Publication 201, Wisconsin Sales and Use Tax Information, Section XVIII. Apply for a seller’s permit at least three weeks before you open your business. If you buy an existing (2) Baseball stadium tax: Publication 201, Wiscon- business, the seller’s permit cannot be transferred sin Sales and Use Tax Information, to you. You must apply for a new permit. If you Section XVIII. Applies to sales and purchases applied for a seller’s permit before you opened made in Milwaukee, Ozaukee, Racine, Wash- your business but did not receive the permit at the ington, and Waukesha counties. time of opening the business, you are allowed to make retail sales. However, you are liable for the (3) Football stadium tax: Publication 201, Wiscon- sales and use taxes and for keeping proper records sin Sales and Use Tax Information, from the date of opening the business. Section XVIII. Applies to sales and purchases made in Brown County. C. Obtaining a Seller's Permit and Filing Returns (4) Local exposition taxes: Publication 410, Local Exposition Taxes. These taxes apply to sales See Part III. of Publication 201, Wisconsin Sales and purchases of certain lodging, food and bev- and Use Tax Information, for information about erages, and car rentals in municipalities located how to obtain a seller's permit. wholly or partially within Milwaukee County. Information about filing sales and use tax returns is CAUTION also provided in Publication 201, Wisconsin Sales and Use Tax Information, Part VIII. • The information in this publication reflects the positions of the Wisconsin Department of III. WHAT IS TAXABLE? Revenue of laws enacted by the Wisconsin Legislature and in effect as of April 1, 2012. Sales, licenses, leases, and rentals of the following Laws enacted and in effect after that date, new products are subject to the Wisconsin sales tax: administrative rules, and court decisions may change the interpretations in this publication. 1. Tangible personal property. • The examples and lists of taxable and nontaxable sales are not all-inclusive. They merely “Tangible personal property” means personal property that can be seen, weighed, measured, set forth common examples. felt, or touched, or that is in any other manner perceptible to the senses, and includes electricity,

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gas, steam, water, and prewritten computer soft- • Photographic services ware, regardless of how it is delivered to the • Printing services (e.g., client provides paper to purchaser. Examples of tangible personal prop- be printed or imprinted upon) erty sold by advertising companies are as • Fabricating services (e.g., client provides hats follows (list is not all-inclusive): to be embroidered) • Sending e-mail advertisements (e.g., e-mail • Books • DVDs blasts) • Brochures • Flyers • Business Cards • Photographs For a complete list of taxable services, see • Calendars • Promotional Giveaways Part X.B. of Publication 201. • Catalogs • Signs • CDs • Tapes IV. WHERE A SALE TAKES PLACE - • Coupons • Trade Show Booths "SOURCING RULES" 2. Coins or stamps of the United States that are In order to determine where a sale takes place for sold, licensed, leased, rented, or traded as col- Wisconsin sales and use tax purposes (where a sale lector’s items above their face value. is “sourced”), a specific hierarchy is used. The hi- 3. Leased tangible personal property that is af- erarchy is referred to as the “General Sourcing fixed to real property, if the lessor has the right Rules.” The “General Sourcing Rules” should be to remove the leased property upon breach or used to determine the location of a sale and are ex- termination of the lease agreement, unless the plained in detail in Part III.C. of Publication 201. lessor of the leased property is also the lessor of One exception to the General Sourc- the real property to which the leased property is Exceptions: ing Rules is for direct mail, which is explained in affixed. Part VIII. of this publication. Other exceptions, in- 4. Specified digital goods, additional digital cluding where to find additional information, are: goods, and digital codes. These digital goods • Information are characterized by the fact that they are trans- Leases, licenses, and rentals - about how to determine the location ferred electronically to the purchaser (i.e., where these transactions take place (i.e., where accessed or obtained by the purchaser by means lease, license, or rental payments are other than tangible storage media). “sourced”) is provided in Part XIII.D. of Publi- “Specified digital goods” means “digital audio cation 201. works,” “digital audiovisual works,” and “digi- • Telecommunications services - Please refer to tal books.” “Additional digital goods” means sec. Tax 11.66, Wis. Adm. Code, “Telecom- greeting cards, finished artwork, periodicals, munication and telecommunications message video or electronic games, and newspapers or services,” for information explaining where other news or information products. See Publi- these services take place (i.e., where these ser- cation 240 for a description of the products that vices are “sourced”). are included. • Retail florists - Information about how to de- Certain services which are sold, licensed, per- termine where sales by retail florists take place formed, or furnished at retail in Wisconsin are also (i.e., where these sales are “sourced”) is pro- subject to Wisconsin sales and use tax. vided in Part VII.E. of Publication 201.

Examples of taxable services sold by advertising companies are as follows (list is not all-inclusive):

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V. SALES BY ADVERTISING advertising materials" or exempt "catalogs and COMPANIES their mailing envelopes," as explained in Part VII.

An advertising company will often make both tax- See Part VI.B.2, "Exemption for Printed Advertis- able and nontaxable sales to its customers. The ing Materials," and Part VI.B.4., "Exemption for general tax treatment of some typical sales is listed Catalogs and their Mailing Envelopes." below. Some products, as well as exemptions that may apply to those products, are explained in more B. Nontaxable Sales detail in Part VI. Charges for the following are not subject to Wis- A. Taxable Sales consin sales or use tax:

The following sales are subject to Wisconsin sales • Preliminary artwork that does not result in the or use tax, unless an exemption applies: production of finished artwork or other tangible personal property or items, property, or goods • Finished artwork. listed in Part III.2. to 4., by the advertising agency. See Part VI.A., " Preliminary Artwork and Fin- ished Artwork." See Part VI.A., "Finished and Preliminary Art- work." • Preliminary artwork that all or any part of results in the production of finished artwork or • Writing original manuscripts or news releases. other tangible personal property or items, prop- • Writing copy to be used in media advertising. erty, or goods listed in Part III.2. to 4., by the advertising agency. • Consultation, market research, and compiling statistical or other information. See Part VI.A., "Preliminary Artwork and Fin- ished Artwork." • Recommendations for advertising themes or merchandising plans. • Signs, circulars, business cards, stationary showcards, banners, posters, bulletins, bro- • Obtaining media space and time. chures, commercials, tapes, or other items of • Printed advertising material transported outside tangible personal property or items, property, Wisconsin by the purchaser for use solely out- or goods listed in Part III.2. to 4. side Wisconsin. See Part VI.B., "Printed Materials." See Part VI.B.2, "Exemption for Printed Ad- • Photographic services. vertising Materials." • Photostats. • Advertising catalogs and the envelopes in which the catalogs are mailed. • Producing, fabricating, processing, printing, or imprinting tangible personal property or items, See Part VI.B.4., "Exemption for Catalogs and property, or goods listed in Part III.2. to 4., for their Mailing Envelopes." clients for a consideration, even though the cli- • Printing or imprinting services that result in ent may furnish the materials used in printed advertising materials, catalogs, or the producing, fabricating, processing, printing, or envelopes in which they are mailed in. imprinting the property, items, or goods. See Part VI.B.2, "Exemption for Printed Ad- Note: The tax does not apply to printing or im- vertising Materials," and Part VI.B.4., printing services that result in exempt "printed "Exemption for Catalogs and their Mailing En- velopes."

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• Products that will be resold by the purchaser. • Packaging and shipping materials if used to transfer merchandise to customers, such as: • Tangible personal property and items listed in Part III.2. used exclusively and directly by a • Bags • Drums manufacturer in manufacturing an article of • Boxes • Labels tangible personal property or item or property • Cans • Sacks listed in Part III.2. or 3., that is destined for sale • Containers if it: • Packaging and shipping materials for use in 1. Becomes an ingredient or component part packing, packaging, or shipping meat or meat of the article of tangible personal property products, regardless of whether these items are or item or property listed in Part III.2. or 3., used to transfer merchandise to customers, such destined for sale; or as: 2. Is consumed or destroyed or loses its identi- • Bags • Labels ty in manufacturing the article of tangible • Boxes • Meat casing personal property or item or property listed • Cans • Sacks in Part III.2. or 3., in any form destined for • Containers • Tape sale. • Drums • Wrapping Paper

Note: A digital good also qualifies for this ex- • Raw materials processed, fabricated, or manu- emption if it would be exempt if sold in a factured into, attached to, or incorporated into tangible form. A digital good cannot, however, printed materials that are transported and used be manufactured. solely outside Wisconsin.

• Tangible personal property or services that are VI. SPECIFIC PRODUCTS AND THEIR used exclusively and directly by a manufacturer in manufacturing shoppers guides, newspapers, EXEMPTIONS or periodicals if it: A. Preliminary Artwork and Finished Artwork 1. Becomes an ingredient or component of the Graphic designers and other advertising companies shoppers guides, newspapers, or periodi- often create preliminary artwork and finished art- cals; or work for their customers. Preliminary artwork and 2. Is consumed or loses its identity in the finished artwork may or may not result in the pro- manufacture of shoppers guides, newspa- duction of another product. pers, or periodicals. 1. Preliminary Artwork This exemption applies regardless of whether the shoppers guides, newspapers, or periodicals Charges for preliminary artwork are considered are sold or given away, but does not apply to a part of the sales price of finished artwork if advertising supplements that are not newspa- all or any of the preliminary artwork results in pers. the production of finished artwork or other tangible personal property or items, property, or Note: A digital good also qualifies for this ex- goods listed in Part III.2. to 4., by the advertis- emption if it would be exempt if sold in a ing agency. Therefore, if the sale of the tangible form. A digital good cannot, however, finished artwork or other product is taxable, the be manufactured. charge for the preliminary artwork is also taxable.

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If the preliminary artwork does not result in the 3. Examples of Preliminary Artwork and Fin- production of finished artwork or other tangible ished Artwork personal property or items, property, or goods listed in Part III.2. to 4., the charge for the pre- Example of Taxable Finished Artwork Trans- liminary artwork is not subject to Wisconsin ferred to Buyer in a Tangible Format: sales or use taxes. The charge is for design ser- Department Store contracts with Advertising vices, which are not among the services that are Company to produce finished artwork. The fin- subject to tax in Wisconsin. ished artwork will be used by Department Store to print flyers, which Department Store will “Preliminary artwork” means artwork pre- print in its in-house print shop. Department pared solely for presenting an idea to a client Store will then mail the flyers to its customers or prospective client. Preliminary artwork in- located in Wisconsin. Advertising Company cludes roughs, visualizations, sketches, provides Department Store with a disk contain- layouts, and comprehensives. ing the finished artwork. Advertising Company is selling Department Store tangible personal 2. Finished Artwork property which is subject to Wisconsin sales tax. The sale of finished artwork is taxable, unless an exemption applies. A list of common ex- Example of Taxable Finished Artwork Trans- emptions is provided in Part VI.A.4. Finished ferred to Buyer in a Digital Format: Same as artwork is tangible personal property, unless it example, above, except that Advertising Com- is transferred electronically. Finished artwork pany sends Department Store an e-mail that is transferred electronically is an additional containing the finished artwork. Advertising digital good. Sales of both tangible personal Company is selling Department Store an addi- property and additional digital goods are sub- tional digital good which is subject to ject to Wisconsin sales and use taxes, unless an Wisconsin sales tax. exemption applies. Example of Taxable Finished Artwork Sold as When an advertising company sells both the Flyers: Candy Store contracts with Advertising finished artwork and the printed material (e.g., Agency to have 10,000 advertising flyers pro- flyers, catalogs, brochures, business cards), the duced. Advertising Agency prepares advertising company’s charge for the finished preliminary artwork. Candy Store decides on artwork becomes a part of its sales price of the one theme and the finished artwork is pro- printed material. duced. Advertising Agency has the flyers printed and delivered to Candy Store. Candy “Finished artwork” means the final artwork Store mails the flyers to its Wisconsin custom- used for actual reproduction by photome- ers. chanical or other processes or for display purposes, but does not include web site or The entire charge to Candy Store by Advertis- home page designs. Finished artwork also ing Agency for the flyers, which includes includes drawings, paintings, designs, pho- preliminary artwork, finished artwork, and the tographs, lettering, paste−ups, mechanicals, flyers, is subject to sales or use tax. assemblies, charts, graphs, and illustrative materials, regardless of whether such items Example of Nontaxable Preliminary Artwork: are reproduced. Car Dealer contracts with Advertising Agency for an ongoing advertising campaign. Advertis- ing Agency submits several suggestions, in the

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form of preliminary artwork, for an upcoming ther a tangible or digital formal (list is not all- advertising campaign. These ideas are all re- inclusive): jected by Car Dealer. The charge by the Advertising Agency for preliminary artwork a. Consumed in the Manufacture of Tangible not chosen for further development is not sub- Personal Property that is Destined for Sale ject to tax, because the preliminary artwork was not developed into finished artwork. Tangible personal property (e.g., finished artwork transferred to the purchaser on a CD) or Example of Taxable Preliminary Artwork: an item listed in Part III.2. that is used exclu- Golf Course contracts with Advertising Agency sively and directly by a manufacturer in the for an ongoing advertising campaign. Advertis- manufacture of tangible personal property des- ing Agency submits several suggestions, in the tined for sale is exempt from tax. If the form of preliminary artwork, for an upcoming purchaser of the finished artwork provides the advertising campaign. Four of the ideas are re- finished artwork to a printer, and the printer jected by Golf Course, but one idea is provides the paper used in printing and sells developed into finished artwork. The charge by the printed material, this exemption applies. Advertising Agency for the finished artwork, The finished artwork is consumed or destroyed which includes the charge for the preliminary in the manufacture of printed material that is artwork, is subject to sales or use tax. destined for sale from the printer to its customer. The exemption also applies to finished Example of Nontaxable Finished Artwork artwork in a digital format. (Section 77.54(2) Sold With Exempt Containers: Advertising and (50), Wis. Stats. (2009-10)) Agency produces finished artwork to be used on Clothing Company’s shipping boxes. The Note: Tangible personal property that is con- boxes are used by Clothing Company to ship its sumed in the creation of a digital good does not products to its customers. Advertising Agency qualify for this exemption. A digital good can- delivers the finished artwork to a printer who not be "manufactured." uses the finished artwork to print and produce the boxes for Advertising Agency. Advertising Example 1: Horse Farm contracts with Adver- Agency then sells the boxes to Clothing Com- tising Agency, located in Wisconsin, to pany. produce an advertising flyer. Advertising Agency prepares preliminary artwork. Horse The entire charge by Advertising Agency to Farm decides on one theme and the finished Clothing Company for the finished artwork and artwork is prepared. Horse Farm takes the fin- boxes is exempt from Wisconsin sales and use ished artwork to a Wisconsin printer and has taxes because the boxes are used by Clothing 10,000 flyers printed. The printer provides the Company in packing, packaging, or shipping paper used to print the flyers. The flyers are merchandise to customers. Clothing Company mailed by the printer to addresses in Wiscon- should provide Advertising Agency with a fully sin. completed exemption certificate claiming the container exemption. The charge to Horse Farm by Advertising Agency for the preliminary artwork and fin- 4. Exemptions ished artwork is exempt from Wisconsin sales and use taxes because the finished artwork is The following is a list of some exemptions that consumed in the production of flyers which are could apply to sales of finished artwork in ei- sold by the printer to Horse Farm.

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Example 2: Assume the same facts as Exam- Example: Bakery, located in Wisconsin, pub- ple 1, except that Horse Farm provides the lishes flyers it gives away to potential paper to the printer, in addition to the finished customers. Bakery purchases paper from a artwork. company who delivers it to a Wisconsin printer that prints the flyers for Bakery. Bakery also The charge to Horse Farm by Advertising purchases finished artwork from Advertising Agency for the preliminary artwork and fin- Company that will be used by the printer to ished artwork is subject to Wisconsin sales tax. print the flyers. Eighty percent (80%) of the The printer is selling a printing service, and not flyers are transported and used solely outside tangible personal property or an item or proper- Wisconsin, while the other twenty percent ty listed in Part III.2. to 3., to Horse Farm. The (20%) of the flyers remain in Wisconsin. The destined for sale requirement is not met and ex- finished artwork purchased by Bakery is exemption from tax does not apply. empt from Wisconsin sales and use taxes, since all or part of the printed material is transported b. Raw Materials Used in Printed Materials and used solely outside Wisconsin. Eighty per- That Are Transported Outside Wisconsin cent (80%) of the paper purchased by Bakery for the flyers is also exempt from Wisconsin Raw materials used in the manufacture of sales or use tax, since eighty percent (80%) of printed materials that are transported and used the flyers are transported and used solely out- solely outside Wisconsin are exempt. This ex- side Wisconsin. emption applies to the sale of finished artwork if all or some of the printed material manufac- c. Consumed in the Manufacture of Newspa- tured using that finished artwork is transported pers, Periodicals, and Shoppers Guides outside Wisconsin for use solely outside Wis- consin, and the purchaser does either of the Tangible personal property (e.g., finished art- following: work provided on a CD) and taxable services that are used exclusively and directly by a 1. Provides the finished artwork to a printer, manufacturer in the manufacture of newspa- and the printer does not provide the papers, periodicals, or shoppers guides (except per used in printing (i.e., the purchaser advertising supplements that are not newspa- provides the printer with the paper to be pers), whether or not the newspapers, used in the printing), or periodicals, or shoppers guides are transferred without charge to the recipient. The finished 2. Uses the finished artwork in its in-house artwork is consumed or destroyed in the manu- print shop. facture of the newspapers, periodicals, or shoppers guides. The exemption also applies The finished artwork is a raw material that is to finished artwork in a digital format. consumed in the manufacture of printed mate- (Section 77.54(2m) and (50), Wis. Stats. (2009- rials and the exemption applies if the above 10)) conditions are met, regardless of whether the finished art is in a tangible or digital format. Example: Company J contracts with an adver- (Section 77.54(43) and (50), Wis. Stats. (2009- tising agency to produce an advertisement to be 10)) published in a shoppers guide. The advertising agency produces preliminary artwork (e.g., Note: If the printer provides the paper, see layouts, "roughs") for approval by Company J. Part VI.A.4.a., for a possible exemption. Upon Company J's approval of the preliminary artwork, the finished artwork for the shoppers

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guide advertisement is produced. The prelimi- The sales price that is subject to Wisconsin sales or nary artwork and finished artwork charges are use tax includes the entire amount that the advertis- billed to Company J. Company J deals directly ing company charges for the printed materials, with the shoppers guide publisher to run the including charges for preliminary and finished art- advertisement in a shoppers guide. The adver- work, photographic services, printing services, and tising agency bills Company J $1,000 for any other costs of the printed materials that are preliminary artwork and $3,000 for finished passed along to the customer, even if such costs are artwork. separately stated on the advertising company’s invoice to its customer. The total $4,000 charge is exempt from Wis- consin sales and use taxes because all of the Example 1: Restaurant contracts with Advertising following are true: Agency to have 10,000 advertising flyers produced. Advertising Agency prepares preliminary • The preliminary artwork results in finished artwork. Restaurant decides on one theme and the artwork; and finished artwork is produced. The advertising • The finished artwork is used exclusively agency has the flyers printed and delivered to Res- and directly by a manufacturer in the manu- taurant. Restaurant mails the flyers to its Wisconsin facture of a shoppers guide; and customers. • The finished artwork is consumed or loses its identity in the manufacture of a shoppers The entire charge to Restaurant by Advertising guide. Agency for the flyers, which includes charges for preliminary artwork, finished artwork, and the fly- B. Printed Materials ers, is subject to tax.

An advertising company’s sales of printed materi- Example 2: Assume the same facts as Example 1, als are subject to Wisconsin sales or use tax, unless except that Restaurant mails 90% of the flyers to an exemption applies. Examples are (list is not all- customers outside Wisconsin and 10% to custom- inclusive): ers in Wisconsin.

• Signs (See Part VI.C., "Advertising Ten percent of the total charge to Restaurant by Signs") Advertising Agency for the flyers, including the • Circulars charges for preliminary artwork, finished artwork, • Business Cards and flyers, is subject to tax. • Stationary Showcards Exception for Mailing Services: If the advertising • Banners company is also responsible for providing mailing • Posters services (e.g., the advertising company hires a • Bulletins printer to print brochures and mail the brochures to • Advertising and Promotional Direct potential customers that are identified on a mailing Mail list), the advertising company’s purchase or sale of • Brochures the mailing services are not taxable if the charges • Letterhead are stated separately on invoices and in its account- • Coupons and Coupon Books ing records. • Newspaper Inserts (See Part VI.B.1., "Exemption for Newspapers, Periodi- “Mailing services” includes services rendered in cals, Shoppers Guides, and Controlled preparing material for mailing, including address- Circulation Publications") ing, enclosing, sealing, metering, affixing stamps,

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sorting, tying, and sacking in compliance with "Newspaper" is defined as "... those publica- postal rules and regulations. Charges for envelopes tions which are commonly understood to be are taxable, but not separately stated charges for newspapers and which are printed and distrib- postage in the sale of pre-stamped envelopes. uted periodically at daily, weekly or other short intervals for the dissemination of current news If the mailing services are not stated separately on and information of a general character and of a the invoice and in the accounting records, the general interest to the public. In addition, any charge for the mailing services is included in the publication which qualifies as a newspaper un- advertising company’s sales price of the printed der s. 985.03 (1) is a newspaper. 'Newspaper' materials to its customer. also includes advertising supplements if they are printed by a newspaper and distributed as a Exemptions that may apply to an advertising com- component part of one of that newspaper's pub- pany's sales of printed materials are listed in 1. lications or if they are printed by a newspaper through 5., below. or a commercial printer and sold to a newspaper for inclusion in publications of that 1. Exemption for Newspapers, Periodicals, newspaper. A 'newspaper' does not include Shoppers Guides, and Controlled Circula- handbills, circulars, flyers, or the like, advertis- tion Publications ing supplements not described in this subsection which are distributed with a news- An exemption is provided for the sale of newspaper, nor any publication which is issued to papers, certain periodicals, shoppers guides, supply information on certain subjects of inter- and controlled circulation publications. est to particular groups, unless such publication a. Newspapers otherwise qualifies as a newspaper within this subsection. In this subsection, advertising is not Sales of newspapers are exempt from tax. An considered news of a general character and of a advertising supplement that is distributed as a general interest." component part of one of the newspaper's publications only qualifies for this exemption if Example 1: Furniture Store contracts with one of the following apply: Newspaper for an advertising supplement in Newspaper's Sunday newspaper. For $10,000, 1. The advertising supplement is printed by Newspaper will print the supplement, insert the the newspaper, or supplement in the newspaper, and distribute the supplement with the newspaper. Newspaper's 2. The advertising supplement is printed by a charge of $10,000 to Furniture Store is not sub- newspaper or commercial printer and sold ject to Wisconsin sales or use tax. to a newspaper for inclusion in that newspaper. Example 2: Same as Example 1, except that Newspaper hires Printer to print the advertising Also exempt from tax are tangible personal supplement for $2,000. Printer's charge of property and taxable services that are used ex- $2,000 to Newspaper is not subject to Wiscon- clusively and directly by a manufacturer in the sin sales or use tax. Newspaper's charge of manufacture of newspapers and that become an $10,000 to Furniture Store is not subject to ingredient or component of the newspaper or Wisconsin sales or use tax. are consumed or lose their identity in the manufacture of a newspaper. Example 3: Same as Example 1, except that Furniture Store hires Printer to print the advertising supplement for $2,000. Printer's charge

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of $2,000 to Furniture Store is subject to Wis- The newspaper and periodical exemption does consin sales or use tax. The advertising not apply to books complete in themselves, supplement is not an exempt newspaper, since even those issued at stated intervals; paperback it was not printed by Newspaper nor was it books, a new one of which may be issued once printed by a newspaper or commercial printer a month or at some other interval; or so−called and sold to Newspaper for inclusion in that “one−shot” magazines that have no literary or newspaper. subject matter connection or continuity between prior or subsequent issues. The b. Periodicals exemption also does not apply to catalogs, programs, scorecards, handbills, maps, real estate Certain periodicals that are sold by subscription brokers’ listings, price or order books, corpo- are exempt from sales and use taxes. Periodi- rate reports to stockholders, house organs, or to cals sold "off the rack" or over the counter are advertising materials which become a compo- subject to tax. nent part of a periodical.

Also exempt from tax is tangible personal Example: Books sold by the Book of the property and taxable services that are used ex- Month Club or similar organizations do not clusively and directly by a manufacturer in the qualify for the newspaper and periodical ex- manufacture of periodicals and that become an emption. ingredient or component of the periodical or are consumed or lose their identity in the manufac- c. Shoppers Guides ture of the periodical. Sales of shoppers guides that distribute no less The exemption for periodicals is limited to pub- than 48 issues in a 12-month period are exempt lications which are sold by subscription and from tax. which are regularly issued at average intervals not exceeding three months, each issue of Also exempt from tax are tangible personal which contains news or information written by property and taxable services that are used ex- different authors which is of general interest to clusively and directly by a manufacturer in the the public, or to some particular organization or manufacture of shoppers guides and that be- group of persons. Each issue must bear a rela- come an ingredient or component of the tionship to prior or subsequent issues in respect shoppers guides or are consumed or lose their to continuity of literary character or similarity identity in the manufacture of a shoppers guide. of subject matter, and there must be some connection between the different issues of the For purposes of these exemptions, a "shoppers series in the nature of the articles appearing in guide" is “a community publication delivered, them. or attempted to be delivered, to most of the households in its coverage area without a re- To qualify for the exemption, the publication quired subscription fee, which advertises a must qualify for the "periodicals rate" under broad range of products and services offered by U.S. Postal laws and regulations or as a con- several types of businesses and individuals.” trolled circulation publication. Exception: Periodicals issued by an educational association d. Controlled Circulation Publications or corporation sales to which are exempt under sec. 77.54 (9a) (f), Wis. Stats., need only be is- Sales of controlled circulation publications are sued at average intervals not exceeding exempt from tax when sold to commercial pub- six months. lishers for distribution without charge or mainly without charge.

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The exemption for tangible personal property paper from Paper Supplier and the printing ser- and taxable services that are used exclusively vices from Printer are subject to tax. There is and directly by a manufacturer in the manufac- no exemption for tangible personal property ture of newspapers, periodicals, and shoppers (i.e., the paper) or services (i.e., the printing guides and that become an ingredient or com- services) that result in a controlled circulation ponent of the newspapers, periodicals, and publication. shoppers guides or are consumed or lose their identity in the manufacture of a newspaper, pe- Example 3: A taxpayer publishes a quarterly riodical, and shoppers guide does not apply to publication which it mails to current and pro- controlled circulation publications. Note: An- spective customers. The publication contains other exemption may apply, such as the articles of interest to customers which contain exemption for manufacturing consumables de- endorsement of the taxpayer’s business and scribed in Part VI.A.4.a. products. The publication also contains advertising of the taxpayer’s products as well as For purposes of the exemption for sales of con- products of other vendors. This publication is trolled circulation publications, a "controlled conducted essentially for the advancement of circulation publication" is “a publication that the taxpayer’s business and does not qualify as has at least 24 pages, is issued at regular inter- a controlled circulation publication. vals not exceeding 3 months, that devotes not more than 75% of its pages to advertising and 2. Exemption for Printed Advertising Materi- that is not conducted as an auxiliary to, and es- als sentially for the advancement of, the main business or calling of the person that owns and Printed advertising materials may be purchased controls it.” from Wisconsin or out-of-state suppliers without tax when the materials are purchased and Example 1: Publisher puts out a monthly 30- stored for the purpose of subsequently trans- page publication that promotes healthy eating. porting them outside Wisconsin by the Seventy percent of the publication consists of purchaser for use thereafter solely outside Wis- articles of interest to persons who are interested consin. This exemption does not apply to in eating and preparing healthy foods. The oth- catalogs. See Part VI.B.4., "Exemption for Cat- er 30% of the publication consists of alogs and their Mailing Envelopes." advertisements that Publisher sells to various businesses in health-related businesses. Pub- Note: Printing services are not taxable if the lisher is only in the business of publishing, and printing services result in printed advertising this publication is not conducted as an auxiliary materials that are stored for the purpose of sub- to or for the advancement of Publisher. Pub- sequently transporting them outside Wisconsin lisher hires Printer to print the publication, by the purchaser for use thereafter solely out- which it then gives away. Printer provides the side Wisconsin. paper that is uses in the publication. Publisher's purchase of the publication from Printer is ex- This exemption does not apply to printed ad- empt from tax, since the publication qualifies vertising materials that remain in Wisconsin or as a controlled circulation publication. are returned to Wisconsin.

In order to qualify for this exemption, all three Example 2: Same as Example 1, except that of the following criteria must be met: Publisher purchases the paper from Paper Sup- plier, who delivers the paper to Printer to print Criteria 1: The item must be “printed the publication. Publisher's purchases of the material;”

11 Publication 235

Criteria 2: The item must be designed to • Sales posters advertise and promote a product or busi- • Advertising sell sheets ness; and • Sales brochures • Coupons Criteria 3: The item must be transported outside of Wisconsin by the purchaser Examples of items that generally do not for use thereafter solely outside Wiscon- qualify as advertising materials include: sin. • Charge cards a. The item must be "printed material." • Gift certificates Printed material is on paper or similar stock. • Invoices Examples of items that qualify as printed • Parts lists materials (but not necessarily printed adver- • Price sheets tising materials) include: c. The item must be transported outside of • Paper Wisconsin by the purchaser for use there- • Laminated paper after solely outside Wisconsin. The item • Charge cards must be transported outside Wisconsin by • Business cards the purchaser or by a mailing company hired • Envelopes by the purchaser. If the item comes back to Wisconsin (e.g., order form, reply enve- Examples of items that do not qualify as lope), it is not for use solely outside printed materials include: Wisconsin and is not exempt. • 3-dimensional items such as key 3. Exemption for Raw Materials Used in Print- chains, mugs, golf balls, etc. ed Materials • Display racks, even if made of cardboard Wisconsin sales and use tax is not imposed on • Matchbooks raw materials if all of the following conditions • Binders (e.g., 3-ring binders) are met:

b. The item must be designed to advertise and • Must be raw materials, that are

promote a product or business. Advertising • Used for the processing, fabricating, or materials are designed to advertise a busi- manufacturing of, or the attaching to or ness or the product or service of a business. incorporating into printed materials, "Advertising" includes calling the attention that are of the public to a product or business and proclaiming the qualities or advantages of a • Transported and used solely outside product or business so as to increase sales. Wisconsin. To advertise a product or service which is There is no requirement that the item must be for sale to the public, it is necessary to draw transported outside Wisconsin by the purchaser. the potential consumer’s attention to it by presenting its good qualities and benefits, Example: Insurance Company purchases paper creating a desire to possess it. Examples of and ink from Supplier, who is located in Illi- items that qualify as advertising materials nois. Supplier ships the paper and ink to include: Insurance Company at Insurance Company's

12 Advertising Companies

location in Wisconsin. Supplier did not collect • A cover letter or insert that is mailed Wisconsin sales tax on its sale to Insurance with or inserted in a catalog, but does Company, because Supplier is not engaged in not become a part of the catalog, does business in Wisconsin. Insurance Company in- not qualify for exemption, unless the corporates the paper and ink into training cover letter or insert is a catalog in it- manuals that are printed by Insurance Compa- self. ny. Insurance Company ships the training • An envelope that is used to mail both an manuals to another state for use solely in that exempt catalog and other items that are other state. Insurance Company’s purchase of not catalogs qualifies for exemption. the paper and ink is exempt from Wisconsin The exemption does not require that the sales or use tax. envelope be used exclusively to mail an 4. Exemption for Catalogs and their Mailing exempt catalog. Envelopes • A coupon book that has a front and back cover, descriptions of products Catalogs, and the envelopes in which the cata- sold, and coupons for such products. logs are mailed, that are designed to advertise The pages are made of 2½" x 9" pages and promote the sale of merchandise or to ad- that are folded in the middle and fas- vertise the services of individual business firms tened together with one staple to create are exempt from Wisconsin sales and use taxes. a coupon book that is 2½" x 4½" when This exemption includes catalogs that are finished. The coupon book qualifies for mailed to addresses in and outside of Wiscon- exemption as a catalog. sin. Printing services that result in exempt catalogs For purposes of this exemption, “catalog” and their mailing envelopes are also not taxa- means a printed and bound, stitched, sewed, or ble. Therefore, if the consumer furnishes the stapled book containing a list and description of material (e.g., paper) and hires a printer to print property or services for sale, regardless of exempt catalogs, the service of printing the ex- whether a price is specified. empt catalogs is not taxable.

A "book" is a set of written, printed, or blank Paper or other property that is used in exempt pages fastened along one side and encased be- catalogs and their mailing envelopes, however, tween protective covers. does not qualify for the catalog exemption (i.e., paper by itself does not meet the definition of Examples: "catalog"). Some other exemptions that may apply to the purchase of paper used in catalogs • A brochure that is folded, but not are: bound, stitched, sewed, or stapled does not qualify for exemption, since the • Paper used in the manufacture of cata- brochure is not a catalog. logs that are sold to customers is • A multiple-page description of property exempt from Wisconsin sales and use for sale that is stapled in the corner taxes. (Section 77.54(2), Wis. Stats. qualifies for exemption as a catalog if it (2009-10)) Paper used in the manufac- has a front and back cover and at least ture of catalogs that are given away two sheets are enclosed between the (rather than sold) does not qualify for front and back covers. this exemption, since the exemption re- quires that the tangible personal

13 Publication 235

property manufactured (i.e., catalogs) to addressees on a mailing list provided by or at be destined for sale. the direction of the purchaser of the printed material, if the cost of the printed material or any • Paper used in the manufacture of shop- tangible personal property or items, property, pers guides, newspapers, and or goods listed in Part III.2. to 4. included with periodicals is exempt from Wisconsin the printed material is not billed directly to the sales and use taxes, regardless of recipients of the printed material. whether such shoppers guides, newspapers, and periodicals are sold or given “Direct mail” includes any tangible personal away. (Section 77.54(2m), Wis. Stats. property, or items, property, or goods listed in (2009-10)) Part III.2. to 4., provided directly or indirectly • Paper used in the manufacture of cata- by the purchaser of the printed material to the logs that are transported and used solely seller of the printed material for inclusion in outside Wisconsin is exempt from Wis- any package containing the printed material, consin sales and use taxes. including billing invoices, return envelopes, (Section 77.54(43), Wis. Stats. (2009- and additional marketing materials. 10)) Paper used in the manufacture of catalogs that are not transported and “Direct mail” does not include multiple items used solely outside Wisconsin does not of printed material delivered to a single ad- qualify for this exemption. dress.

5. New Exemption for Advertising and Promo- Example 1: Printer is hired to produce 1,000 tional Direct Mail (will become effective on copies of a form letter, each personalized with July 1, 2013) customer information. Printer shrink-wraps the pallet and ships the letter to a third-party mail- Effective July 1, 2013, an exemption will apply ing service hired by the purchaser. The to the sales price from the sales of and the stor- purchaser hires the mailing service provider to age, use, or other consumption of advertising fold the letters, insert them into envelopes, and and promotional direct mail. This exemption mail them. The printed material is not “direct will include advertising and promotional direct mail” because the seller/printer is not deliver- mail sent to Wisconsin addresses, as well as ing or distributing the printed material to a addresses outside of Wisconsin. Note: Prior to mass audience or to addressees on a mailing list July 1, 2013, Wisconsin sales of advertising at the direction of the purchaser. and promotional direct mail are taxable, except for sales of catalogs and their mailing enve- Example 2: Same as Example 1, except that lopes. Printer folds the letters, inserts them into the envelopes, and mails them. The printed materi- “Advertising and promotional direct mail” al is “direct mail.” means “direct mail” that has the primary purpose of attracting public attention to a product, Example 3: Printer is hired to produce 100,000 person, business, or organization or to attempt advertising flyers. Printer ships 1,000 copies of to sell, popularize, or secure financial support the flyer to each of the purchaser’s 100 stores for a product, person, business, or organization. located in various states. The purchaser will make these flyers available to their customers “Direct mail” means printed material that is de- as they enter the store. The flyers shipped to the livered or distributed by the U.S. Postal Service purchaser’s stores are not “direct mail,” be- or other delivery service to a mass audience or cause multiple items of the same printed

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material are delivered or shipped to a single ports without tax for resale. Sign Company’s pur- address and because the printed materials are chase of concrete for the foundation is subject to delivered to and billed to the recipient (pur- sales or use tax. chaser). Note: The amount charged for the concrete Example 4: Printer is hired to produce 100,000 foundation is not taxable, whether or not it is copies of an advertising brochure. Printer ships separately stated on the billing. If it is not sepa- the brochures to the purchaser’s headquarters. rately stated on the billing, Sign Company may The purchaser then repackages the brochures allocate a reasonable portion of its sales price into 1,000 packages, each containing 100 bro- to the sale and installation of the concrete chures, and mails each package to the foundation. individual members of its sales force. The flyers are not “direct mail” when shipped from the Example 2 - Building Sign: Sign Company sells, printer to the purchaser or when shipped from installs, and repairs advertising signs that are at- the purchaser to its sales force, because they are tached to buildings. Sign Company’s receipts from multiple items of the same printed material de- its sales of signs are subject to sales tax. Sign livered to a single address. Company may purchase the signs, and related repair parts that are transferred to its customer, C. Advertising Signs without tax for resale.

Sales of advertising signs, except for their under- Example 3 - Leased Sign: Car Dealership leases a ground concrete foundations, are subject to tax, sign from Sign Company on which the dealership unless an exemption applies. The repair or other displays various advertising messages. Car Dealer- service to advertising signs is also taxable. The fol- ship has possession and control of the sign. Sign lowing examples illustrate the tax treatment of Company’s lease receipts are subject to sales tax. various signs: Example 4 - Advertising Services: Same as Exam- Example 1 - Billboard Sign ple 3, except that Car Dealership does not have Example 2 - Building Sign possession or control of the sign. Sign Company’s Example 3 - Leased Sign charges are for displaying the message. Sign Com- Example 4 - Advertising Services pany’s receipts from the service of displaying a Example 5 - Advertising Video with Optional Dis- message are not subject to sales tax. play Device Example 6 - Advertising Video with Mandatory Example 5 - Advertising Video with Optional Dis- Display Device play Device: Sign Company is in the business of providing electronic signs and advertisements. Example 1 - Billboard Sign: Sign Company sells, Customer will rent space from an airport in its ter- installs, and repairs advertising signs consisting of minal where it can advertise its product. Sign a billboard, steel supports, and a concrete founda- Company creates a video advertisement for Cus- tion. On its billings, Sign Company separately tomer and, for a separate and optional monthly fee, states the amount billed for the concrete founda- Sign Company also rents a display device to Cus- tions. Sign Company’s sales of the billboard signs, tomer. The airport's charge to Customer for the including installation, are subject to sales tax, ex- space in its terminal is not taxable. Sign Company's cept for the amounts allocated to the concrete charges to Customer for the video advertisement is foundations. Sign Company's repair of such bill- a taxable sale of a specified digital good and Sign board signs is also taxable. Sign Company may Company's rental charge for the display device is a purchase materials for the billboard and steel sup- taxable rental of tangible personal property. Sign

15 Publication 235

Company may purchase the display device without Revenue’s Common Questions, titled Computer – tax for resale if its only use of the display device is Hardware, Software, Services. to rent it in the regular course of its business activi- ties. Although web site design services are generally not taxable, some of the charges relating to the creation Example 6 - Advertising Video with Mandatory of a web site may be taxable. For example, the cre- Display Device: Same as Example 5, except that ation of an online video, graphic (such as a logo or Sign Company's charge for the display device is an animated graphic), or an online banner are sub- not separate and optional. In order to receive the ject to tax. advertising video, Customer must pay a monthly fee for the display device (i.e., Customer cannot Therefore, if the charge for the web site design in- purchase or rent the advertising video without pay- cludes an online logo, banner or ad, or online ing the monthly fee for the display device). Sign video, the charge for such taxable products is sub- Company's monthly charge for the display device ject to tax if the charge is separate and optional is part of Sign Company's taxable sales price of its from the charge for the web site design. sale or lease of the advertising video. Sign Compa- ny is the consumer of the display device that it The following examples illustrate when a charge is provides for the mandatory fee with the purchase “separate and optional”: or rental of the advertising video and is liable for Wisconsin sales or use tax on its purchase of the Example 1: Designer designs web sites. Hotel con- display device. tracts with Designer A to design a web site for a fee of $2,000. Upon receiving the web site design, D. Design Services, Including Web Site Design Hotel may (1) hire Designer to design a personalized online video for the web site for an additional This section will help you to identify which prod- fee; (2) hire another designer to design a personal- ucts sold by a graphic designer are taxable. Also ized online video for the web site (or design the see Part VI.A., "Finished and Preliminary Art- personalized online video itself); or (3) choose to work." not include a personalized online video. Regard- less of which option Hotel chooses, Designer will Web site design is not among the services subject be paid the $2,000 for its web site design services. to Wisconsin sales tax if the service is not primari- Designer’s charges for the web site design are not ly a photographic service. Whether the completed subject to Wisconsin sales tax. If Hotel hires De- web site design is transferred to the customer elec- signer to create a personalized online video, tronically (i.e., accessed or obtained by the Designer’s charge for the personalized online vid- customer by means other than tangible storage me- eo is subject to tax. dia) or transferred using a tangible storage medium (e.g., CD), the charge for the web site design work Example 2: Designer designs web sites. Bowling is not subject to tax. If the charge is primarily for Alley contracts with Designer to design a web site photographic services, however, the charges are for a fee of $2,000. The charge for the web site de- subject to Wisconsin sales or use tax. sign may include a personalized online video, if requested by Bowling Alley. Bowling Alley may Note: Charges for web hosting, domain names, da- choose to have a personalized online video in its ta storage, and data processing are not subject to design or not. Regardless of whether Bowling Al- Wisconsin sales or use taxes. Additional infor- ley chooses to include the personalized online mation about the tax treatment of computer video or not, Designer will be paid the $2,000 for services can be found in one of the Department of its web site design services. No part of Designer’s

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charge to Bowling Alley for the web site design is the sale of an additional digital good. See Pub- subject to Wisconsin sales tax. lication 240, Digital Goods, for additional information about digital goods. Note: Charges E. E-Mail Blasts and Text Marketing, for only copy and layout are not taxable. Management of Social Media Web Sites, and E-Newsletters Both the sale of the additional digital good and the sale of a telecommunications messaging All or a part of an advertising company's charge for service are subject to Wisconsin sales tax to the sending e-mail blasts and text marketing, manage- extent that the sales takes place in Wisconsin. ment of social media web sites, and sending e- See Part VI.E.5. "When Does a Sale of E- newsletters may be taxable, depending on the Blasts, Text Marketing, and E-Newsletters products provided in each specific situation. Each Take Place in Wisconsin?" of these products may provide the customer with any combination of graphic design services, digital 2. Managing Social Media Web Sites goods, and telecommunications message services. Charges for web site management are not sub- 1. E-Mail Blasts and Text Marketing ject to sales or use taxes. The sale of specified digital goods, however, is subject to tax. If the The service of sending advertising e-mail blasts web site management service includes charges and text messages is generally subject to Wis- for the separate and optional sale of specified consin sales or use taxes as a digital goods (e.g., digital banners, digital vide- telecommunications message service. An e- os), the tax only applies to the separate and mail blast is the sending of an advertising mes- optional taxable products purchased. See sage to an electronic mailing list of e-mail “Charges for Services that are Separate and Op- addresses. Text marketing is the sending of an tional,” in Part VI.E.4. advertising text message to a list of cellular telephone numbers. If the sale includes specified digital goods or additional digital goods (taxable) and nontaxa- Although some service providers may provide ble web site management services sold for one nontaxable services in conjunction with the nonitemized price that does not vary depending sending of e-mail and text messages (e.g., ser- on the products that the customer chooses, the vices related to account maintenance, such as entire sales price may be taxable as a "bundled address management), the primary purpose of transaction." The sale is a "bundled transaction" the services provided may be to distribute e- if both of the following apply: mail and text messages to the customer’s subscriber list. In those cases, if there is a single a) The seller's purchase price of the taxable charge for the taxable and nontaxable services, products (specified digital goods and addi- the charge is subject to tax. If there is not a sin- tional digital goods) is more than 10% of gle charge for the taxable and nontaxable the seller's total purchase price. services, see Part VI.E.4. "Charges That Are b) The seller's sales price of the taxable prod- Separate and Optional." ucts (specified digital goods and additional digital goods) is more than 10% of the A customer may also hire an advertising com- seller's total sales price. pany to create an e-mail advertisement that is finished artwork and then send it to an e-mail Exception: If the specified digital goods or ad- distribution list. The advertising company's sale ditional digital goods are essential to the use of and distribution of the e-mail advertisement is the web site management services and the true

17 Publication 235

object of the transaction is to receive the web See Publication 240, Digital Goods, for addi- site management service, it is not a "bundled tional information. transaction." 4. Charges That Are Separate and Optional • If the transaction is a "bundled transaction," the entire sales price is taxable, unless at the If a seller makes sales of both taxable and non- retailer's option, the retailer can identify by taxable products to its customers, the tax reasonable and verifiable standards from treatment of each product is determined inde- the retailer's books and records that are kept pendently if the products are sold separately in the ordinary course of its business for and optional from each other. other purposes, including purposes unrelat- ed to taxes, the portion of the price that is Charges for nontaxable services are not subject attributable to products or services that are to Wisconsin sales or use taxes if the nontaxa- not subject to the tax. If the retailer chooses ble services are separate and optional from the this option, the portion of the sales price taxable services. A charge is separate and op- that relates to nontaxable products is not tional if the purchaser is not required to taxable. purchase one service in order to receive the other and the price is less if only one of such • If the transaction is not a "bundled transac- services is purchased. tion," and the true objective of the transaction is to provide the nontaxable web Example: Customer may buy any or all of the site management services, no part of the following three services from Advertising charge is taxable. The retailer is, however, Company without any obligation to obtain the required to pay sales or use tax on its pur- other services from Advertising Company: chase of the specified or additional digital goods, if applicable. 1. E-Mail Blasts - Advertising Company will • For a detailed explanation of "bundled send monthly e-mail blasts for $500 per transactions, see Part X.C. in Publica- month (taxable telecommunications mes- tion 201, Wisconsin Sales and Use Tax saging services). Information. 2. Database Management - Advertising Company will store a customer database on 3. E-Newsletters its server and will perform data processing services to the database (e.g., address E-newsletters (i.e., electronic newsletters) changes, subscriber deletions) for $200 per generally contain news and other information month (nontaxable, since data storage and that is of interest to a specified group of busi- data processing are not taxable services). nesses or individuals and are sent to a list of e- 3. List Management - Advertising Company mail addresses. will send confirmation e-mail messages to persons subscribing and unsubscribing from The advertising company's sale and distribution the e-mail list for $400 per month (taxable of e-newsletters are taxable to the extent that telecommunications messaging services). the sale occurs in Wisconsin. Additional digital goods include news or other information prod- Each of the charges for the services in 1. – 3. ucts. See Part VI.E.5. "When Does a Sale of E- are listed separately on the invoice that Adver- Blasts, Text Marketing, and E-Newsletters tising Company gives Customer. Take Place in Wisconsin?" Customer may cancel one or two of the services and still receive the other one or two

18 Advertising Companies

services from Advertising Company for the For detailed information about "Where a Sale same price. Advertising Company may hire an- Takes Place," see Part IV. other party to do one or more of the services or may choose to have its own employees do one F. Radio and Television Commercials or more of the services. Advertising Company will only charge Customer for such services An advertising company may be hired to produce a that it chooses to receive. radio or television commercial. A master tape may be produced and copies or "dubs" of the master Services 1. and 3. are subject to tax, while Ser- tape are then sent to the radio and television sta- vice 2. is not. Note: If Customer was required tions. The advertising company may be hired to do to purchase one or more of the services from all or some of these production functions. The ra- Advertising Company in order to receive one or dio and television stations will generally be paid to more of the other services OR Advertising air the commercial by the advertising company's Company did not reduce its charge to Customer customer. for services that Customer performed itself or hired another party to perform, the sale of the Sales of tapes or other items of tangible personal services are not separate and optional sales. property; or items, property, or goods in Part III.2. to 4.; are subject to tax, unless an exemption ap- 5. When Does a Sale of E-Blasts, Text Market- plies. For example, the sale of a master tape alone ing, and E-Newsletters Take Place in is subject to tax, unless the master tape is con- Wisconsin? sumed in the manufacture of tangible personal property that is destined for sale, or some other ex- Since the customer will not receive the e-mail emption applies. blasts, text marketing, and e-newsletters at the seller's business location, the sale takes place at However, when an advertising concept does not the locations where the e-mail messages, text result in a final product, the charge for creating the messages, and e-newsletters are sent to and are concept is not taxable. The creation of the concept taxable to the extent that they are sent to loca- only is preliminary artwork. tions in Wisconsin. An allocation should be made between the e-mail messages, text mes- Also, see Part VII.A. "Preliminary and Finished sages, and e-newsletters sent to Wisconsin Artwork." locations (taxable to Wisconsin) and those sent to locations outside Wisconsin (not taxable to Example 1: Real Estate Company contracts with Wisconsin). Advertising Agency to produce a radio commercial. Advertising Agency produces a demonstration If the advertising company is not able to deter- tape (demo) which contains several different jin- mine the physical location where the e-mail gles which could be used in the commercial. Real messages, text messages, and e-newsletters are Estate Company selects one of the jingles, and the being sent, the sale takes place at the purchas- commercial is produced. er's address as indicated by the advertising company's business records, if the records are The charge by Advertising Agency for the demo is maintained in the ordinary course of the adver- subject to tax. The demo is preliminary artwork. tising company's business and if using that Since finished artwork was produced from the pre- address to establish the location of the sale is liminary artwork, the charge is subject to tax, not in bad faith. unless an exemption applies to the sale of the finished artwork.

19 Publication 235

Example 2: Construction Company contracts with Although the entire charge is taxable, the Wiscon- Advertising Agency to create a jingle for a com- sin tax only applies to the extent that the copies or mercial that will be produced by Construction "dubs" were sent to locations in Wisconsin. Note: Company's employees and e-mailed to certain ra- An exemption exists for the sale of motion picture dio stations. Advertising Agency produces a film or tape, and motion pictures or radio or televi- demonstration tape (demo) which contains several sion programs for listening, viewing, or broadcast, different jingles which could be used in the com- and advertising materials related to them, sold to mercial. Construction Company does not select any motion picture theater or radio or television station. of the jingles for its commercial. Since the prelimi- A radio or television station does not, however, nary artwork (i.e., the demo tape containing the generally purchase a commercial. Rather, the radio jingles) did not result in any finished artwork, the or television station's customer provides the radio charge by the advertising company is not subject to or television station with the commercial when the tax. customer purchases advertising air time from the radio or television station. Example 3: Same as Example 2, except that Con- struction Company chose a jingle for its Example 1: Department Store decides to have a commercial. Advertising Agency prepared a tape television advertising campaign and contracts with containing the chosen jingle for Construction Advertising Agency. Advertising Agency produces Company's employees to use in their production of a master tape. The master tape remains at Advertis- the radio commercial. Advertising agency's charge ing Agency's studio, and ten copies or "dubs" are to Construction Company for finished artwork is produced by Advertising Agency. One dub is given subject to tax. Construction Company may not to Department Store in Wisconsin, and the other provide Advertising Agency with an exemption nine dubs are mailed by the advertising agency di- certificate claiming the manufacturing exemption, rectly to various Wisconsin television stations. The since the tape will not be consumed in the manu- air time is arranged by Department Store. Advertis- facture of tangible personal property that is ing Agency charges Department Store X a total of destined for sale. $100,000.

When an advertising company is hired to produce a The entire charge by Advertising Agency for the radio or television commercial for its customer and production of the master tape and dubs (i.e., to send or transmit the commercial to radio or tele- $100,000) is subject to Wisconsin tax. vision stations designated by its customer, the advertising company's entire charge to its customer Example 2: Same as Example 1, except that four is subject to tax. The entire charge is taxable, even dubs are mailed by to Advertising Agency to tele- if the advertising company separately lists any of vision stations outside Wisconsin. the charges on its invoice to the customer, such as the charge for the master tape or the advertising Sixty percent of the entire charge by Advertising company's charges for reimbursement of its ex- Agency for the production of the master tape and penses or subcontractors' fees. The entire charge is dubs is subject to Wisconsin tax ($100,000 x 60% taxable, regardless of whether the advertising com- = $60,000). The remaining 40% is not subject to pany transfers the commercial copies or "dubs" to Wisconsin tax because that portion of the sale took the radio and/or television stations on a tangible place outside Wisconsin ($100,000 x 40% = medium (e.g., tape) or an electronic medium (e.g., $40,000). an Internet web site, e-mail, through an electronic transmission company). Example 3: Same as Example 1, except that Ad- vertising Agency's contract with Department Store states that it will pay Advertising Agency $70,000

20 Advertising Companies

plus expenses for the master tape that results in the video. The videographer shoots the video and gives dubs and $1,000 for each of the dubs. Advertising Advertising Agency a tape containing the video. Agency provides Department Store with an invoice The videotape will be incorporated into the master which separately lists each of the following: tape. Advertising Agency may purchase the videotape without tax, since it will be consumed in the Master tape $70,000 manufacture of the master tape. Expenses 20,000 Dubs ($1,000 x 10 dubs) 10,000 The advertising company may hire a third party to Total Due $100,000 produce a master tape and the advertising company The entire charge by Advertising Agency for the may then duplicate the master tape and send the production of the master tape and dubs (i.e., dubs to a radio or television station. The Wisconsin $100,000) is subject to tax. The tax treatment does sales and use tax treatment of the advertising com- not change due to the fact that the items are sepa- pany's purchase of the master tape depends on rately stated on Advertising Agency's invoice to its whether the advertising company will be sending customer. the dubs in a tangible format (e.g., a tape) or a digital format (e.g., transmitted electronically). An advertising company may purchase finished • If the dubs are transferred to the radio or televi- artwork (e.g., photo, video) without tax if the ad- sion station in a tangible format, the advertising vertising company consumes that finished artwork company may purchase the master tape without in its creation of a master tape that it will sell to its tax, since it will be consumed in the manufac- customer. The advertising company is, however, ture of tangible personal property that is liable for sales or use tax on its purchase of photog- destined for sale (i.e., the dubs in a tangible raphy or videography services used in its creation format). of the master tape. The exemption for property consumed in manufacturing does not extend to ser- • If the dubs are transferred to the radio or televi- vices such as photographic services. sion station in a digital format, the advertising company's purchase of the master tape is sub- Example 1: Advertising Agency is creating a mas- ject to tax. Since a digital good cannot be ter tape, which it will sell to its customer. manufactured, the manufacturing consumables Advertising Agency purchases a stock video which exemption does not apply. will be incorporated into the master tape. Advertis- Note: The advertising company's sale of the dubs ing Agency may purchase the video without tax, is subject to tax, regardless of whether the dubs are since it will be consumed in the manufacture of the transferred in a tangible or digital format. If a third- master tape. party transmitter is hired by the advertising company, the purchase of the electronic transmission of Example 2: Advertising Agency is creating a mas- the dubs is also taxable to the extent that the elec- ter tape, which it will sell to its customer. tronic dubs are transmitted to locations in Advertising Agency hires a videographer to shoot a Wisconsin. video on Advertising Company's hard drive. Ad- vertising Company will incorporate the video into the master tape. Advertising Agency is liable for sales or use tax on its purchase of the photographic services used in its manufacture of the master tape.

Example 3: Advertising Agency is creating a master tape, which it will sell to its customer. Advertising Agency hires a videographer to shoot a

21 Publication 235

Example of the Production of a Television Commercial

Facts: • Advertising Company is hired by Customer to provide 15 television stations in Wisconsin with a commercial for the contracted amount of $50,000. • Advertising Company hires Producer to create the master tape for $20,000 plus its expenses for subcontracting a company to provide Producer with a videotape. The contract states that Adver- tising Company is required to provide Producer with an audiotape. Both the videotape and the audiotape will be consumed in the manufacture of the master tape that Producer sells to Adver- tising Company. • Producer hires Videographer to shoot a videotape and provide Producer with a videotape in Wis- consin for $5,000. • Advertising Company hires Company B to create an audiotape. Advertising Company will pay Company B $1,500 for the audiotape. Company B will send the finished audiotape to Producer, at the direction of Advertising Company. • Producer will create two master tapes (one for duplication and one that it will retain). Produc- er will consume the video and audiotapes in its manufacture of a master tape of a commercial. • Transmitter is hired by Advertising Company for $5,000 to send electronic transmissions of the commercial to 15 television stations hired by Advertising Company's customer. The television stations are all located in Wisconsin. • Producer will send the master tape to Transmitter, at the direction of Advertising Company.

Tax Treatment: Advertising Company’s sale of the electronically transmitted commercials to Customer is subject to Wisconsin sales tax. Sales of the television commercials are sales of digital audiovisual works, which are taxable.

Advertising Company’s purchase of the master tape from Producer is subject to Wisconsin sales or use tax, including Producer's charge to Advertising for reimbursement of the videotape. The charge for the reimbursement of the videotape is a part of Producer’s sales price of its sale of the master tape (as op- posed to a sale of the videotape and a separate sale of the videography services). Producer may, however, purchase the videotape from Videographer without tax, since Producer will be consuming the tape in its manufacture of the master tape that it sells to Advertising Company.

Advertising Company’s purchase of the audiotape from Company B is exempt from tax, since it will be consumed in the manufacture of tangible personal property (i.e., the master tape) destined for sale. Ad- vertising Company should provide Company B with a fully completed exemption certificate (Form S-211 or Form S-211-SST) claiming the exemption for property consumed in manufacturing.

Advertising Company's purchase of the service of electronically transmitting the commercials to the 15 television stations in Wisconsin is subject to tax, since Transmitter is providing telecommunications messaging services to addresses in Wisconsin.

22 Advertising Companies

VII. PURCHASES BY AN will not use, but will sell to its customers, may be ADVERTISING COMPANY purchased without tax for resale. Sales tax is col- lected by the advertising company when the A. Purchases of Items Used By an Advertising tangible personal property, item, property, or good, Company or taxable service is sold to its customers.

Items purchased and used by an advertising com- Examples of items that may be purchased by an pany in its business are taxable. Examples of advertising company without tax if they are pur- taxable items used by an advertising company are chased to sell to others are (this list is not all- as follows (this list is not all-inclusive): inclusive):

• Computer hardware and prewritten com- • Printed materials puter software • Promotional items (not including those giv- • Furniture en away by the advertising company) • Office supplies • Calendars • Cameras • Books • Wall art for the office • Photographs • Promotional items that will be given to prospective customers (e.g., keychains) • Certain digital goods (See Part III.C.) VIII. WHERE A SALE TAKES PLACE - DIRECT MAIL B. Don't Forget Use Tax! There are special provisions in the law for deter- An advertising company is liable for Wisconsin use mining where the sale of “direct mail” takes place. tax if it purchases taxable property, items, goods, "Direct mail" means printed material that is deliv- or services that it uses and the seller does not ered or distributed by the U.S. Postal Service or charge Wisconsin sales or use tax to the advertising other delivery service to a mass audience or to ad- company. dressees on a mailing list provided by or at the direction of the purchaser of the printed material, if Two common situations are: the cost of the printed material or any tangible personal property; or items, property, or goods a. Buying items (e.g., computers, office supplies) described in Part III.2. to 4.; included with the from an out-of-state seller that does not charge printed material is not billed directly to the recipi- Wisconsin sales tax, and ents of the printed material. b. Buying items without tax by providing an ex- “Direct mail” includes any tangible personal prop- emption certificate indicating resale to the erty; or items, property or goods described in seller and then using the item, rather than re- Part III.2. to 4.; provided directly or indirectly by selling it (e.g., paper purchased for brochures, the purchaser of the printed material to the seller of but used by advertising company in printing in- the printed material for inclusion in any package voices). containing the printed material, including billing invoices, return envelopes, and additional market- C. Purchases of Items Which Are Sold to Customers ing materials.

Tangible personal property and items, property, or “Direct mail” does not include multiple items of goods listed in Part III.2. to 4., and taxable ser- printed material delivered to a single address. vices, purchased by an advertising company that it

23 Publication 235

Note: Sales of catalogs and their mailing envelopes • A direct pay permit, that are designed to advertise and promote the sale • An exemption certificate (Form S-211 of merchandise or to advertise the services of indi- or Form S-211-SST) claiming direct vidual business firms are exempt from tax. An mail, or exemption also applies to printing or imprinting services that result in such catalogs and their mail- • Other information that indicates the ap- ing envelopes. “Catalog” means a printed and propriate taxing jurisdiction to which bound, stitched, sewed, or stapled book containing the direct mail is delivered to the ulti- a list and description of property or services for mate recipients. sale, regardless of whether a price is specified. Printed materials that are not bound, stitched, If the seller ships the direct mail from Wis- sewed, or stapled, cannot meet the definition of consin, the seller’s entire charge for the “catalog.” For example, an advertising pamphlet direct mail is subject to tax, excluding sepa- that is printed on a single sheet of paper and simply rately stated delivery charges. folded one or more times, without being bound, stitched, sewed or stapled, does not meet the defi- If the seller ships the direct mail from a loca- nition of “catalog,” and the exemption does not tion outside of Wisconsin, the purchaser is apply. liable for the use tax on its purchase price of direct mail, excluding any separately stated The sales price of direct mail does not include sep- delivery charges, that relate to direct mail arately stated delivery charges. For purposes of the shipped to addresses in Wisconsin. No credit sale of direct mail, “separately stated delivery for taxes paid to another state is allowed as a charges” means charges by a seller to prepare and credit against the Wisconsin use tax due. deliver the direct mail to a location designated by the purchaser of the direct mail, including charges b. Purchaser provides direct pay permit or for transportation, shipping, postage, handling, exemption certificate claiming direct crating, and packing, that are separately stated on mail. If the purchaser provides an exemp- the invoice, bill of sale, or similar document that tion certificate claiming direct mail or a the seller gives to the purchaser. direct pay permit to the seller, the purchaser shall pay or remit, as appropriate, to the de- 1. Sales from October 1, 2009 through May 26, partment the use tax on all purchases for 2010 which the tax is due. The seller is relieved from liability for collecting sales tax. Wis- Parts a. through c., below, give the location of a consin tax is due for charges by the seller, sale of direct mail. Part d., below, provides the excluding any separately stated delivery location of a sale of services (e.g., the customer charges, that relate to direct mail shipped to provides the paper and a printer provides the addresses in Wisconsin. printing and mailing services). c. Purchaser provides delivery information. a. Purchaser does not provide a direct pay If the purchaser provides delivery infor- permit, exemption certificate claiming mation indicating the jurisdictions to which direct mail, or certain other information. the direct mail is to be delivered to the re- The sale of direct mail takes place at the lo- cipients, the sale takes place in those cation from which the direct mail is shipped jurisdictions. The seller must collect and if the purchaser does not provide the seller remit the tax according to the delivery in- one of the following: formation provided by the purchaser and, in the absence of bad faith, the seller is re-

24 Advertising Companies

lieved of any further obligation to collect including invoices, bills, account state- tax on the sale of direct mail based on in- ments, and payroll advices. formation provided by the purchaser. • Any legally required mailings, including Wisconsin tax is based on charges by the privacy notices, tax reports, and stockholder seller for the direct mail, but excluding any reports. separately stated delivery charges, that relate to direct mail shipped to addresses in • Other nonpromotional direct mail, includ- Wisconsin. ing newsletters and informational pieces, that is delivered to existing or former d. Charges for taxable services. The seller’s shareholders, customers, employees, or charges for taxable services that result in agents. the production of direct mail (e.g., printing services when the customer provides the “Other direct mail” does not include printed paper) are subject to Wisconsin tax to the materials that result from developing billing in- extent the direct mail is shipped to address- formation or providing any data processing es in Wisconsin. The portion of the charges service that is more than incidental to produc- for services relating to direct mail that is ing the other direct mail. shipped to addresses outside of Wisconsin is not subject to Wisconsin sales tax. Note: a. Charges for advertising and promotional For the period of October 1, 2009 through direct mail or services that are an inte- May 26, 2010, the location of the sale of a gral part of the production and taxable service relating to direct mail is de- distribution of advertising and promo- termined under the General Sourcing Rules. tional direct mail See Part VII.C. 1. Purchaser does not provide a direct 2. Sales occurring on and after May 27, 2010 pay permit, exemption certificate claiming direct mail, or certain other Effective May 27, 2010, the law was amended information. The sale of advertising to adopt definitions of “advertising and promo- and promotional direct mail, or services tional direct mail” and “other direct mail.” that are an integral part of the production and distribution of advertising and “Advertising and promotional direct mail” promotional direct mail, takes place at means direct mail that has the primary purpose the location from which the advertising of attracting public attention to a product, per- and promotional direct mail is shipped son, business, or organization or to attempt to if the purchaser does not provide to the sell, popularize, or secure financial support for seller one of the following: a product, person, business, or organization. • A direct pay permit, “Other direct mail” means any direct mail that • An exemption certificate is not advertising and promotional direct mail, (Form S-211 or Form S-211-SST) regardless of whether advertising and promo- claiming direct mail, or tional direct mail is included in the same mailing. “Other direct mail” includes all of the • Other information that indicates the following: appropriate taxing jurisdiction to which the advertising and promo- • Transactional direct mail that contains per- tional direct mail is delivered to the sonal information specific to the addressee, ultimate recipients.

25 Publication 235

If the seller ships the advertising and 3. Purchaser provides delivery infor- promotional direct mail from Wiscon- mation. If the purchaser provides sin, the entire charge for the advertising delivery information indicating the ju- and promotional direct mail, or a ser- risdictions to which the advertising and vice that is an integral part of the promotional direct mail is to be deliv- production and distribution of advertis- ered to the recipients, the seller must ing and promotional direct mail, is collect and remit the tax according to subject to tax, excluding any separately the delivery information provided by stated delivery charges. the purchaser on all sales of advertising and promotional direct mail or services If the seller ships the advertising and that are an integral part of the produc- promotional direct mail from a location tion and distribution of advertising and outside of Wisconsin, the purchaser is promotional direct mail delivered to liable for use tax on its purchase price Wisconsin, excluding any separately (excluding any separately stated deliv- stated delivery charges. The tax is cal- ery charges) of the advertising and culated at the rate imposed by the promotional direct mail, or a service jurisdiction(s) where the advertising and that is an integral part of the production promotional direct mail is delivered to and distribution of advertising and pro- the recipients. motional direct mail, if the advertising and promotional direct mail is delivered 4. Bundled transactions. If a transaction to addresses in Wisconsin. No credit for is a bundled transaction that includes taxes paid to another state is allowed as advertising and promotional direct mail, a credit against the Wisconsin use tax a.1. to 3., above, only apply if the pri- due. mary purpose of the transaction is the sale of products or services that meet 2. Purchaser provides direct pay permit the definition of advertising and promo- or exemption certificate claiming ditional direct mail. rect mail. If the purchaser provides an exemption certificate claiming direct b. Charges for other direct mail or services mail or a direct pay permit to the seller, that are an integral part of the produc- the purchaser must pay or remit, as ap- tion and distribution of other direct mail propriate, to the department the use tax on all purchases of advertising and 1. Purchaser does not provide a direct promotional direct mail or services that pay permit, exemption certificate are an integral part of the production claiming direct mail, or certain other and distribution of advertising and pro- information. The sale of other direct motional direct mail delivered to mail or services that are an integral part Wisconsin, excluding any separately of the production and distribution of stated delivery charges. The tax is cal- other direct mail takes place at the pur- culated at the rate imposed by the chaser's address as indicated by the jurisdiction(s) where the advertising and seller's business records, if using that promotional direct mail is delivered to address to establish the location of the the recipients. sale is not in bad faith. If that address is a Wisconsin address, Wisconsin tax is due on the entire charge by the Wiscon- sin seller for the other direct mail or the

26 Advertising Companies

services that are an integral part of the IX. DO YOU HAVE QUESTIONS OR production and distribution of the other NEED ASSISTANCE? direct mail, but excluding any separately stated delivery charges. If you are unable to find an answer to your ques- tion about sales and use taxes, e-mail, write, or call 2. Purchaser provides direct pay permit the department. or exemption certificate claiming direct mail. If the purchaser provides an Visit our web site . . . www.revenue.wi.gov exemption certificate claiming direct mail or a direct pay permit to the seller, E-Mail DORSalesBusinessTaxandWithhold- the purchaser must pay or remit, as ap- [email protected] propriate, to the department the use tax (excluding any separately stated deliv- Write . . . Wisconsin Department of Revenue ery charges) on all purchases of other P.O. Box 8949, Mail Stop 5-77 direct mail or services that are an inte- Madison, WI 53708-8949 gral part of the production and distribution of other direct mail if the Telephone . . . (608) 266-2776 advertising and promotional direct mail Fax . . . (608) 267-1030 is delivered to addresses in Wisconsin. The tax is calculated at the rate imposed You may also contact any of the Department of by the jurisdiction(s) where the other di- Revenue offices. Please see the department’s web rect mail is delivered to the recipients. site for a listing of offices and their current hours. c. Single mailing including both advertising and promotional direct mail and other X. BUSINESS DEVELOPMENT direct mail. If advertising and promotional ASSISTANCE – WISCONSIN direct mail and other direct mail are includ- ECONOMIC DEVELOPMENT ed in a single mailing, the location of the CORPORATION sale of that mailing is determined in same manner as a sale of other direct mail. If you have questions about what other permits may be needed for your business, or need assistance in Information about how to determine if a purchaser obtaining a permit, check the Wisconsin Economic has provided the seller with delivery information Development Corporation's web site for information indicating the tax jurisdictions can be found in the about Permits and Licensing. article on the department's web site titled "Collecting Sales or Use Tax on Advertising and Promotional Direct Mail." Examples are provided in the article.

Note: Effective July 1, 2013, the sale of advertising and promotional direct mail will be exempt from Wisconsin sales and use taxes. See Part VI.B.5.