Tax 11.70 Note The total $4,000 charge is exempt from Wisconsin sales or use tax because the preliminary artwork results in finished artwork and the finished artwork becomes an ingredient or component part of a shoppers guide, or is consumed or loses its identity in the manufacture of shoppers guides.

Tax 11.70(3)(L) (L) Containers, labels, sacks, cans, boxes, drums, bags, or other packaging and shipping materials for use in packing, packaging, or shipping tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats., if the containers, labels, sacks, cans, boxes, drums, bags, or other packaging and shipping materials are used by the purchaser to transfer merchandise to customers. Also exempt are meat casing, wrapping paper, tape, containers, labels, sacks, cans, boxes, drums, bags, or other packaging and shipping materials for use in packing, packaging, or shipping meat or meat products, regardless of whether these items are used to transfer merchandise to customers.

Tax 11.70 Note Example: An advertising agency produces finished artwork to be used on Company K’s shipping boxes. The boxes are used by Company K to ship its products to its customers. The advertising agency delivers the finished artwork to a printer who uses the finished artwork to print and produce the boxes which the advertising agency resells to Company K.

Tax 11.70 Note The entire charge for the finished artwork and boxes is exempt from Wisconsin sales or use tax because the boxes are used by Company K in packing, packaging, or shipping merchandise to customers. Company K should provide the agency with a properly completed exemption certificate.

Tax 11.70(3)(m) (m) Raw materials processed, fabricated, or manufactured into, attached to, or incorporated into printed materials that are transported and used solely outside Wisconsin.

Tax 11.70 Note Example: Company A, located in Wisconsin, publishes flyers it gives away to potential customers. Company A purchases paper from a company who delivers it to a Wisconsin printer that prints the flyers for Company A. The flyers are transported and used solely outside Wisconsin.

Tax 11.70 Note The paper purchased by Company A for the flyers is exempt from Wisconsin sales or use tax.

Tax 11.70(3)(n) (n) Advertising and promotional direct mail.

Tax 11.70 Note Example 1: Company B, located in Wisconsin, contracts with a printer to have 10,000 advertising flyers that are designed to promote Company B’s products printed. Once the printer finishes printing the advertising flyers, the printer mails the flyers to the addresses on a mailing list provided by Company B. The addresses are in and outside Wisconsin. The charge by the printer to Company B is exempt from Wisconsin sales and use tax since the advertising flyers are advertising and promotional direct mail.

Tax 11.70 Note Example 2: Same as Example 1, except the flyers are sent by the printer to Company B, the purchaser, and Company B mails the flyers to the addresses on the mailing list. The flyers are not advertising and promotional direct mail because the seller/printer is not delivering the flyers to a mass audience or to addresses on a mailing list at the direction of the purchaser.

Tax 11.70(4) (4) Measure of tax.

Tax 11.70(4)(a) (a) Tax applies to an advertising agency’s total sales price from the sale of tangible personal property, items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., and taxable services without any deduction for any cost element which becomes a part of the sales price. These elements include consultation, research, copy, supervision, model fees, rentals, photostats, typesetting, postage, express, telephone, travel, agency service fees, or any other labor or service cost incurred in the production of that property. No deduction may be taken even though the costs are separately itemized in a billing to the client.

Tax 11.70(4)(b) (b) Tax applies to in-progress billings for production work which ultimately results in the production of finished artwork or other tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats.

Tax 11.70(5) (5) When and where sale occurs.

Tax 11.70(5)(a) (a) The tax applies to an agency’s sales price from a sale of or the storage, use, or consumption of tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., sourced to Wisconsin under s. 77.522, Stats., regardless of whether:

Tax 11.70(5)(a)1. 1. The transfer is to the advertiser or to a third party at the direction of or on behalf of the client.

Tax 11.70(5)(a)2. 2. The client is located in or outside Wisconsin.

Tax 11.70 Note Example: An agency’s billing to a client in Minnesota for finished artwork transferred to a business in Wisconsin is taxable.

Tax 11.70(5)(b) (b) The sale of tangible personal property, items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., and taxable services occurs when the advertising agency transfers possession of the tangible personal property or item, property, or good under s. 77.52 (1) (b), (c), or (d), Stats., to the client or the client realizes the economic benefits of the property’s, item’s, or good’s use, even though the property, item, or good may not be physically transferred to the client.

Tax 11.70(6) (6) Fees added to billings. When an amount billed as an agency “fee,” “retainer,” “service charge,” or “commission” represents services rendered which are a part of the sale of tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., the amount is taxable. If it clearly represents a charge or a part of a charge for any nontaxable service rather than for the sale of tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., it is not taxable. A fee representing both taxable and nontaxable sales shall be reasonably allocated between taxable and nontaxable sales, unless the fee is a bundled transaction, as defined in s. 77.51 (1f), Stats.

Tax 11.70(7) (7) Purchases by agencies.

Tax 11.70(7)(a) (a) An advertising agency is the seller of, and may purchase without tax for resale, any item that:

Tax 11.70(7)(a)1. 1. Is resold before use by the advertising agency.

Tax 11.70 Note Example: Company L is an advertising agency. Company L purchases various art equipment such as paint brushes, easels, etc., that it uses in its operations. A portion of the art equipment is sold to the general public for use. The art equipment Company L sells to the general public may be purchased by Company L without Wisconsin sales or use tax as property for resale, provided Company L gives its supplier a properly completed exemption certificate claiming resale.

Tax 11.70(7)(a)2. 2. Physically becomes an ingredient or component part of tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats., the advertising agency produces and sells.

Tax 11.70 Note Example: Company M is an advertising agency that produces displays for customers. The displays are usually framed or matted photographs or prints. Company M may purchase the frames, matting, and paper for photographs and prints without Wisconsin sales or use tax as property for resale, provided it gives its supplier a properly completed exemption certificate claiming resale.

Tax 11.70(7)(b) (b) An advertising agency is the consumer of all tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., purchased by the agency, other than tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., purchased for immediate sale to customers or that are used exclusively and directly by a manufacturer in manufacturing an article of tangible personal property or an item or property under s. 77.52 (1) (b) or (c), Stats., that is destined for sale and that becomes an ingredient or component part of the article of tangible personal property or the item or property under s. 77.52 (1) (b) or (c), Stats., that is destined for sale. As the consumer, the advertising agency is subject to Wisconsin sales or use tax on the tangible personal property and items, property, and goods under s. 77.52 (1) (b), (c), and (d), Stats., purchased.

Tax 11.70 Note Example: Company N purchases various office equipment, such as typewriters, computers, tables and cabinets which it uses in its advertising agency office. Company N purchases the equipment from an out-of-state supplier that is not required to collect Wisconsin sales or use tax. Company N is subject to Wisconsin use tax on its purchase of the office equipment.

Tax 11.70 Note Note: Exemption certificates and their instructions may be obtained free of charge from the department’s web site at www.revenue.wi.gov, by writing to Wisconsin Department of Revenue, P.O. Box 8902, Madison, WI 53708-8902, or by calling [phone].