TSSN-30

Sales and Use Taxes on Advertising and Public Relations Services

This TSSN is superseded in part by Ruling 95-7; 
obsoleted in part by PS 95(4) and SN 2003(6); cited in  Rulings 91-18, 92-1, 92-3, 93-8

Advertising Services and Public Relations defined:

(a) Advertising services mean all services related to the creation, preparation, production or the dissemination of advertisements. Advertising services include layout, art direction, graphic design, mechanical preparation, production supervision, placement and rendering advice to a client concerning the best methods of advertising that client's products or services. As of September 1, 1990, writing and copywriting used as part of an advertising or public relations service are subject to the Sales and Use Tax. Advertising services do not include marketing.

(b) Public relations services include advising a client concerning the presentation of that client's image and promoting the interests of clients. Public relations services may influence and/or inform the public. Public relations services include but are not limited to preparation of press releases, company newsletters, political campaigns, product receptions, speeches, and videos.

Marketing defined:

Marketing services, as defined below, are not subject to the Sales and Use Tax. Marketing means and includes performing tests and research for a particular client in connection with the development of particular products, property, goods or services that the client sells to consumers in the regular course of business. Business analysis, management, management consulting and public relations services, however, are not considered to be marketing services and are subject to the Sales and Use Tax even if an insignificant portion of the contract involves marketing services.

Media Advertising defined:

Media advertising means advertisements in newspapers and magazines and on radio, television and cable television stations. Media advertising also includes advertisements placed on billboards, buses or taxicabs. Media advertising does not include direct mail advertising, advertising by telephone, preprinted advertising circulars even if inserted in newspapers.

Direct Mail Advertising defined:

Direct mail advertising means advertising in the form of discount coupons, advertising pamphlets, or other printed material delivered by mail to potential customers of the client, including accompanying envelopes and labels.

Cooperative direct mail advertising means 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.

Collateral items defined:

Collateral items are tangible personal property composed of an advertising service and a printed material component. Collateral items are printed materials included but not limited to direct mailers, coupon packets, flyers, pamphlets, brochures, sales literature, annual reports, catalogs, newsletters, posters, bumper stickers and buttons prepared for the client by the service provider in connection with rendering an advertising or public relations service. Direct mail advertising, including cooperative direct mail advertising, is considered a collateral item.

Principal Place of Business defined:

Principal place of business means the place from which the trade or business is directed or managed.

Charges for Advertising and Public Relations Services:

(a) Advertising and Public Relations Services Rendered In-state and/or Out-of-state. Advertising and public relations services are subject to Connecticut Sales and Use Tax when the benefit and use of the service occurs in this state regardless of the place of business of the service provider or the place of business of the client.

(1) When a non-media advertising campaign occurs exclusively in Connecticut, the total charge for the advertising contract is subject to Sales and Use Tax even if the client's place of business is located outside this state because the use of the service is made within this state and the benefit is received within Connecticut.

(2) When a non-media advertising and public relations campaign occurs exclusively outside Connecticut, the total charge for the advertising contract is not subject to Sales and Use Tax because the use of the service is made outside this state and the benefit is received outside Connecticut even if the client's place of business is located in Connecticut.

(3) When a non-media advertising and public relations campaign occurs both inside and outside of Connecticut, the charge for the advertising service must be allocated to indicate the portion of the charge attributable to the benefit received and use made of the service in-state and the portion of the charge attributable to out-of-state. The Sales and Use Tax only applies to the portion of the charge for which the benefit received and use made was in Connecticut. The contract between the service provider and the client must support the assignment of the service to in-state and out-of-state locations. To the extent the use and benefit of the service cannot be assigned to an identifiable location, the service is presumed to be used to support the general administration or operation of the client's business and the service is presumed to be used at the client's principal place of business.

(b) Media Advertising

The rendering of advertising and public relations services is not taxable when related to the development of media advertising. The total gross receipts for advertising services related to the development of media advertising billed by the service provider are not subject to sales tax.

Charges for advertising services which are not related to the development of media advertising are subject to tax, whether based in whole or in part, on hourly billing, vendor costs, commissions, markups or monthly fees.

(c) Collateral Items

The service provider must charge Sales and Use Tax on the total charge for the collateral items including the fees for creation, design, graphic design, development, layout, art direction, mechanical preparation, production supervision, printing, placement and dissemination.

(d) Contracts containing Media Advertising and Taxable Advertising Services

If advertising services related to the development of media advertising and taxable advertising services are rendered in the same contract, the charge for the advertising services is subject to tax in its entirety, unless that portion of the charge attributable to services related to media advertising is separately stated on the bill or invoice to the client.

Adequate records must be maintained by the service provider to substantiate that the portion of the charge attributable to services unrelated to media advertising has not been understated.

(e) Contracts entered in before July 1, 1989

If a contract to render advertising or public relations services is entered into before July 1, 1989, only that portion of the charge for services rendered after that date is subject to tax. Payments received after that date but attributable to services rendered before that date are not subject to tax, as long as the service provider's bill or invoice to the client expressly indicates that the services were rendered before July 1, 1989.

Purchases of Tangible Personal Property and Services used by Advertising Agencies:

(a) Resale Certificates For Purchases of Integral, Inseparable, Component Parts of Advertising and Public Relations Services

As of July 1, 1990, the service provider rendering advertising or public relations services may purchase those services enumerated in Section 12-407 (2) (i) of Connecticut General Statutes which become an integral and inseparable component part of advertising services tax free by issuing bonafide resale certificates to their suppliers provided the cost of each integral and inseparable component part purchased for resale is separately stated on the bill or invoice to the client. Examples of services which become an integral and inseparable component part include writing service, copywriting services, layouts, art direction, graphic designs, mechanical preparation, typeset copy, production supervision, placement services and personnel fees for models hired for use in a one-client engagement in an advertising campaign.

(b) Resale Certificates For Purchases of Collateral Items

Where collateral items such as pamphlets, brochures, bumper stickers, buttons and posters are transferred to clients, the service provider is making sales subject to tax. Materials that are physically incorporated into the items sold, such as the paper and ink that are ingredients or components of pamphlets, and the printing of collateral items intended for resale may be purchased for resale if the service provider issues a Regulation 1 Resale Certificate to the vendor.

(c) Materials, supplies, equipment and services used in connection with performing and public relations advertising services which cannot be purchased for resale

The person rendering advertising or public relations services is considered to be the consumer of tangible personal property, such as paint, tools, drawing tables, easels, office supplies and office equipment, purchased in connection with the rendering of services, including services related to the development of media advertising. Items of tangible personal property such as photographs, artwork, cassettes and video cassettes, are considered to be consumed by the service provider and are subject to the tax. The service provider rendering advertising or public relations services is also considered to be the consumer of taxable services used in performing the advertising or public relations services if these services do not become an integral, inseparable component part of the advertising or public relations service. Those services purchased by the advertising or public relations service provider which are incidental to the services being performed are deemed to be used by the service provider and are subject to the tax. Example: The purchase of stenographic services for general office use by the advertising or public relations firm is taxable.

(d) Printed Material Certificate

When the service provider delivers printed material printed in Connecticut to a client in this state, the service provider may accept a Printed Material Certificate, Regulation 20, from the client if at least a portion of the printed material will be shipped for use outside of this state within 30 days following its delivery. The service provider must apply Sales Tax only to the charge for the portion of the printed material which will be used in Connecticut.

PLEASE NOTE THE FOLLOWING NEW INFORMATION ABOUT DRS.

FOR FURTHER INFORMATION: To order forms and publications or for further information, call the Department of Revenue Services at 860-297-5962 (Hartford area or out-of-state) or 1-800-382-9463 (in-state). Forms and publications may be ordered through voice-mail 24-hours a day by choosing Option 3 on your touch tone telephone.

Electronic Delivery Options: You can also obtain tax forms and publications 24-hours a day from our Web site. Telecommunications Device for the Deaf (TDD/TT) users only call 860-297-4911 during business hours.

TSSN-30

NEW 6/90