Ruling 92-2

Sales and Use Taxes Direct Mail Firms


Situation 1: A company wishing to advertise (hereinafter "client") contracts with a printer to print advertising inserts and then deliver the inserts to Company A, a direct mail firm. The contract between the client and printer is separate and apart from any contractual arrangement between Company A and the client. Upon delivery of the advertisements to Company A, Company A provides a mailing service, consisting of sorting, folding and inserting the preprinted advertisements into a package for mailing. Company A charges the client for the mailing service and postage only.

Situation 2: Same facts as Situation 1, except the client does not contract with a printer to have preprinted advertisements delivered to Company A. Instead, Company A works directly with the client on the development of the advertisements. Company A then contracts with the printer, which bills Company A for the printing. Company A performs the same mailing service as in Situation 1, and bills the client, separately stating the sales price of the printed material, service charges and postage charges.


(a) Whether services consisting of sorting, folding, inserting and mailing preprinted advertisements are taxable;

(b) Whether services consisting of developing advertisements for clients, having the advertisements printed, and disseminating the advertisements are taxable; and

(c) Whether postage charges are includable in the measure of any applicable tax.


With respect to Issue (a), the Department has previously held, in Ruling No. 90-10, that mailing services involving addressing, sorting, folding and inserting preprinted materials into packages for mailing, and the mailing of such packages, are not subject to tax.

With respect to Issue (b), and the facts in Situation 2, Conn. Gen. Stat. §12-407(2)(i)(W), as most recently amended by Public Act 91-3, §103, (June Spec. Sess.), provides, in pertinent part, as follows:

(2) "Sale" and "selling" mean and include: . . . (i) the rendering of certain services for a consideration, exclusive of such services rendered by an employee for his employer, as follows: . . . (W) advertising or public relations services, including layout, art direction, graphic design, mechanical preparation, or production supervision, not related to the development of media advertising or cooperative direct mail advertising . . 

The Department's Special Notice on Sales and Use Taxes on Advertising and Public Relations Services, TSSN-30, addresses a number of issues relating to advertising services. In TSSN-30, "advertising services" is defined to include "all services related to the creation, preparation, production or the dissemination of advertisements."

The services performed by Company A for the client in producing advertisements, having them printed and disseminating them, constitute "advertising services," as that phrase is used in Conn. Gen. Stat. §12-407(2)(i)(W). However, the statute has been amended, effective for sales occurring on or after October 1, 1991, to exempt "cooperative direct mail advertising" from the taxable service category. TSSN-30, p. 2, defines "cooperative direct mail advertising" to mean

direct mail advertising for more than one business delivered by mail in a single package or bundle to potential customers of such businesses participating in the advertising.

Based on information provided by Company A, its advertising activities consist primarily of "cooperative direct mail advertising." Thus the advertising services of Company A were taxable prior to October 1, 1991 and are exempt thereafter, to the extent they are "cooperative direct mail advertising services."

The printing costs incurred by Company A in the preparation of the advertising are taxable, even if the service is not. Company A may either pay use tax to the printer or purchase the printing on a resale basis, if Company A issues a resale certificate pursuant to Conn. Agencies Regs. 12-426-1 to the printer (TSSN-30, p. 4). The taxable printing charges purchased on resale by Company A should be separately stated on its bill to the client.

In addition, when Company A obtains, on behalf of the client, printed material printed in Connecticut, Company A may accept a Printed Material Certificate, pursuant to Conn. Agencies Regs. §12-426-20, from the client if at least a portion of the printed material will be mailed by Company A for use outside this state within 30 days following its delivery.

With respect to Issue (c), for sales occurring prior to October 1, 1991, the cost of postage must be included in the measure of the tax on advertising services unless the client has primary liability for the payment of such postage to the United States Postal Service. Based upon information provided by Company A, it appears that it does have primary liability for postage costs, and so it must include postage in the measure of the tax in connection with its taxable advertising services.


The amount charged by a direct mail firm for the production and dissemination of a finished advertisement is subject to sales and use taxes under Conn. Gen. Stat. §12-407(2)(i)(W) for sales occurring prior to October 1, 1991, and is exempt thereafter, provided the advertising is "cooperative direct mail advertising." Printing may be purchased by the direct mail firm on either a tax paid or a resale basis. If printing is purchased on a resale basis, the charges therefore must be separately stated to the client and tax must be collected, notwithstanding the fact that the services provided are exempt. Postage charges for which the direct mail firm is primarily liable and which are not directly passed through to the client on a dollar for dollar basis must be included in the measure of the tax for sales occurring prior to October 1, 1991.


March 23, 1992