Tax 11.56(6)(b) (b) The exemption under s. 77.54 (2), Stats., described in par. (a) 1. and 2., applies to property and items purchased by a person who does not use the property other than to provide it to a manufacturer described in par. (a) for use by the manufacturer exclusively and directly in manufacturing tangible personal property and items and property under s. 77.52 (1) (b) and (c), Stats., to be sold. The exemption under s. 77.54 (2), Stats., does not apply if the manufactured tangible personal property or item or property under s. 77.52 (1) (b) or (c), Stats., is not to be sold by the manufacturer to its customer or by the customer.

Tax 11.56 Note Examples: 1) A paper manufacturer’s purchases of negatives which it transfers to a printer, who uses the negatives exclusively and directly to produce printing which the printer sells to the paper manufacturer are exempt from the tax.

Tax 11.56 Note 2) An advertising agency’s purchases of color separations which are furnished to a commercial printer who uses the color separations exclusively and directly to produce advertising material the printer sells to the advertising agency are exempt from the tax.

Tax 11.56(7) (7) Purchases for use in manufacturing printed matter not for sale.

Tax 11.56(7)(a) (a) The exemption under s. 77.54 (2m), Stats., applies to tangible personal property or services that are used exclusively and directly by a manufacturer in manufacturing shoppers guides, newspapers, or periodicals and that become an ingredient or component of the shoppers guides, newspapers, or periodicals or that are consumed or lose their identity in the manufacture of the shoppers guides, newspapers, or periodicals, whether or not they are transferred without charge to a recipient.

Tax 11.56 Note Examples: Examples of nontaxable purchases for use in manufacturing printed matter include:

Tax 11.56 Note 1) A shoppers guide publisher, who distributes the publication without charge, purchases paper and furnishes it to a printer who charges for the printing of the shoppers guide.

Tax 11.56 Note 2) A shoppers guide publisher purchases paper it uses to print a shoppers guide which it distributes without charge to recipients.

Tax 11.56(7)(b) (b) Section 77.54 (43), Stats., provides that Wisconsin sales or use tax is not imposed on raw materials if both of the following conditions are met:

Tax 11.56(7)(b)1. 1. The raw materials are processed, fabricated, or manufactured into, attached to, or incorporated into printed materials.

Tax 11.56(7)(b)2. 2. The resulting printed materials will be transported and used solely outside Wisconsin.

Tax 11.56 Note Examples: 1) Company A, a Wisconsin company, publishes catalogs to promote the sale of its products. Company A purchases paper from a company that does not have nexus in Wisconsin. The paper is delivered to a Wisconsin printer that prints the catalogs for Company A. The catalogs are shipped outside Wisconsin for use solely outside Wisconsin.

Tax 11.56 Note The paper purchased by Company A for the catalogs is not subject to Wisconsin use tax.

Tax 11.56 Note 2) Assume the same facts as 1) above, except that the company selling the paper is located in Wisconsin.

Tax 11.56 Note The paper purchased by Company A for the catalogs is not subject to Wisconsin sales tax.

Tax 11.56 Note 3) Company B purchases finished artwork from an advertising agency. The artwork and paper are provided to a printer who will print catalogs for Company B. The catalogs are provided without charge to customers outside Wisconsin. The charge by the advertising agency to Company B is exempt from Wisconsin sales and use tax even though the printer is not selling tangible personal property because the finished artwork is used for processing, fabricating or manufacturing printed material that is transported and used solely outside Wisconsin.

Tax 11.56(7)(bm) (bm) Section 77.52 (2) (a) 11., Stats., provides that the tax does not apply to the service of printing or imprinting tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., that results in printed material, catalogs, or envelopes that are exempt under s. 77.54 (25), (25m), or (59), Stats.

Tax 11.56 Note Example: Company Z purchases paper that is used to print catalogs that are designed to advertise and promote the sale of Company Z’s merchandise. The paper is delivered to Company X, a Wisconsin printer, that prints the catalogs for Company Z. The catalogs are shipped both in and outside Wisconsin. The charge by Company X to Company Z for the printing of the catalogs is not taxable. However, Company Z owes tax on its purchase of the paper that it provides to Company X for those catalogs that are not shipped outside Wisconsin for use solely outside Wisconsin. Company Z’s purchase of the paper for those catalogs that are shipped outside Wisconsin is exempt as provided in par. (b).

Tax 11.56(7)(c) (c) The tax applies to purchases of artwork, single color or multicolor separations, negatives, flats, and similar items if those purchases are used in the manufacture of tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats., not to be sold, other than items exempt under par. (a) or (b). A printer who does not supply paper used in printing tangible personal property is not selling tangible personal property but rather, is selling a service.

Tax 11.56 Note Example: 1) A retailer purchases color separations which are used in its own printing plant to produce advertising material it distributes to its customers in Wisconsin. The sale of the color separations is subject to Wisconsin sales or use tax because the advertising materials manufactured are not destined for sale.

Tax 11.56 Note 2) Company B purchases finished artwork from an advertising agency. The artwork and paper are provided to a printer who will print flyers that are not catalogs for Company B. The flyers are provided without charge to customers in Wisconsin. The charge by the advertising agency to Company B is subject to Wisconsin sales and use tax. The exemption under s. 77.54 (2), Stats., does not apply because the printer is not selling tangible personal property or an item, or property under s. 77.52 (1) (b) or (c), Stats., and the exemption under s. 77.54 (43), Stats., does not apply because the flyers are used in Wisconsin.

Tax 11.56(8) (8) Purchases of fuel and electricity for use in manufacturing printed matter. Section 77.54 (30) (a) 6., Stats., provides an exemption for fuel and electricity consumed in manufacturing tangible personal property, or items or property under s. 77.52 (1) (b) or (c), Stats., in this state. “Manufacturing” is defined in s. 77.51 (7h), Stats.

Tax 11.56(9) (9) Additional exemptions for printing industry.

Tax 11.56(9)(a) (a) Definitions. In s. 77.54 (61), Stats., and this subsection:

Tax 11.56(9)(a)1g. 1g. “Book printing” means activities described under 323117 of the North American Industry Classification System.

Tax 11.56(9)(a)1r. 1r. “Commercial printing, except screen printing and book printing, without publishing, except grey goods printing” means activities described in 2012 North American Industry Classification 323111.

Tax 11.56(9)(a)2. 2. “Copies of the product” means finished artwork in a digital form that is generated, furnished, and used for the purpose of printing; represents the object, such as a book, catalog, pamphlet, or magazine, as it is to appear in a printed form; and includes files containing instructions or other information required by the printer for printing the product, such as instructions for plate-making or setting ink-levels at the printing press, whether these instructions or other information are furnished to the printer or derived by the printer from the finished art files.

Tax 11.56(9)(a)3. 3. “Finished artwork” has the meaning given in s. 77.51 (3rm), Stats.

Tax 11.56(9)(a)5. 5. “Primarily” means more than 50 percent.