Direct Mail Advertising and Sales Tax Challenges: Navigating - PowerPoint PPT Presentation

Presenting a live 110 ‐ minute teleconference with interactive Q&A Direct Mail Advertising and Sales Tax Challenges: Navigating Differing State Policies Tracking and Managing Exemption, Nexus, Sourcing, Use Tax and Other Related Issues THURSDAY, JULY 28, 2011 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Don Fuga Principal Tax Research Analyst Vertex Inc. Berwyn Pa Don Fuga, Principal Tax Research Analyst, Vertex Inc. , Berwyn, Pa. enior Tax Consultant, Vertex Inc. , Berwyn, Pa. Joseph Geiger, S Martin Eisenstein, Member, Brann & Isaacson , Lewiston, Maine For this program, attendees must listen to the audio over the telephone. Please refer to the instructions emailed to the registrant for the dial-in information. Attendees can still view the presentation slides online. If you have any questions, please contact Customer Service at1-800-926-7926 ext. 10 .

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Direct Mail Advertising and Sales Tax Ch ll Challenges: Navigating Differing State N i ti Diff i St t Policies Seminar July 28, 2011 Don Fuga, Vertex Inc. Joseph Geiger, Vertex Inc. don.fuga@ vertexinc.com joseph.geiger@ vertexinc.com Martin Eisenstein, Brann & Isaacson meisenstein@ brannlaw.com

Today’s Program Introductory Concepts S lide 7 – S lide 14 [Don Fuga] Examples Of S pecific S tate Treatments S lide 15 – S lide 31 [Joseph Geiger] Nexus Issues S lide 32 – S lide 41 [Mart in Eisenst ein] S lide 42 – S lide 51 Printer's Liability To Charge Tax [Mart in Eisenst ein] How S S TP Treats Certificates Printers May Need S lide 52 – S lide 53 [Don Fuga]

Don Fuga, Vertex Inc. INTRODUCTORY CONCEPTS INTRODUCTORY CONCEPTS

Definition SSUTA Agreement  “Direct mail ” means printed material delivered or distributed by U.S. mail or other delivery service to a mass audience or to addressees on y a mailing list provided by the purchaser or at the direction of the purchaser, when the cost of the items are not billed directly to the recipients. “Direct mail” includes tangible personal property supplied directly or indirectly by the purchaser to the direct mail seller for inclusion in the package containing the printed material. “Direct mail” does not include multiple items of printed material delivered to a single address. dd 8

Definition Qualifiers That Broaden Scope  Included in the definition is the term “advertising materials,” examples of which include the following:  Video and audio tapes  Pens  Key rings  Key rings  Computer disks  Coffee mugs 9

Definition Qualifiers That Limit Scope  Examples of qualifiers that limit scope include the following:  Method of delivery limited to the U.S. Postal Service  Specify only limited printed materials (e g Specify only limited printed materials (e.g., include or exclude include or exclude catalogs)  Exclude advertising materials   Limit printed matter content to price and item Limit printed matter content to price and item  Limit to free publications published on a regular basis  Exclude multiple items of printed matter  Limit exemption to cooperatives 10

Examples Of Printed Material That Qualify  The following items are generally considered to qualify but some may be excluded in certain jurisdictions:  Mail order catalogs M il d t l  Advertising circulars  Coupons  Advertising folders  Printed envelopes  Electoral literature Electoral literature  Newspaper inserts  One-time license fee for a mailing list 11

Examples Of Items That May Not Qualify  The following items are generally not considered to qualify, but some may in certain jurisdictions:  Advertising materials (unless allowed by definition) g ( y )  Stockholder reports  Personalized information   Legally required mailings Legally required mailings  Privacy notices  Informal informational literature that is not in the form of advertising d ti i 12

Typical Tax Issues For Taxpayers  Does the advertising printed matter or materials qualify for an exemption and if so, in which jurisdictions?  Is postage exempt and if so, in which jurisdictions? p g p j  Does the printer have the ability to charge the appropriate tax where applicable?  Does my IT system have the ability to accrue the correct use tax when Does my IT system have the ability to accrue the correct use tax when the printer fails to charge the appropriate tax?  What is the correct exemption certificate to issue the printer, where applicable? applicable?  Are there storage issues with direct mail advertising literature or materials?  Are my records adequate to sustain exempt transactions?  Are my records adequate to sustain exempt transactions? 13

Typical Tax Issues For Printers  Does my IT system have the ability to charge the appropriate tax?  Does the mailing list received from my customer contain information Does the mailing list received from my customer contain information needed to comply with sourcing rules?   What exemption certificates are acceptable? What exemption certificates are acceptable?  Are there storage issues with direct mail literature? 14

Joseph Geiger, Vertex Inc. EXAMPLES OF SPECIFIC STATE EXAMPLES OF SPECIFIC STATE TREATMENTS

Defining Direct Mail Advertising  “Direct mail advertising” includes catalogs, letters, circulars, brochures, and pamphlets that consist of printed sales messages if the advertising p p p g g material is printed to the purchaser’s special order; delivered by the seller, the seller’s agent or a mailing house acting as the purchaser’s agent, via mail or common carrier; and received by any other person who becomes the owner of the material at no cost to the recipient. 16

Taxability Of Direct Mail Advertising  Direct mail advertising is taxable in most states.  Direct mail advertising is generally not taxable in the following states:  CA  MO MO  NY  OH  PA 17

California  An exemption exists for the gross receipts from the sale of, and the storage, use, or other consumption in California of catalogs, letters, g , , p g , , circulars, brochures, and pamphlets that consist substantially of printed sales messages for goods and services and are printed to the special order of the purchaser and mailed or delivered by the seller, the seller's agent, or a mailing house, acting as an agent for the purchaser, through the U.S. Postal Service or by common carrier to any other person at no cost to that person who becomes the owner of such printed sales messages. (Sec. 6379.5, Rev. & Tax Code) i t d l (S 6379 5 R & T C d ) 18

Florida  Exempt are free circulated publications the content of which is Exempt are free, circulated publications, the content of which is primarily advertising, that are published on a regular basis and distributed through the mail. (Fla. Stat. Sec. 212.08(7)(w)) 19

Iowa  Envelopes used to contain advertising materials are exempt. (Rule 701-18.41 (422, 423)) 20