Revenue Administrative Bulletin 1988-33

Approved: June 10, 1988

SALES AND USE TAX - NEWSPAPER SUPPLEMENTS

(Replaces Position Paper SUW 86-001)

RAB-88-33. The purpose of this Bulletin is to clarify the taxability of newspaper supplements or inserts as defined in Acts 51 and 52 of the Public Acts of 1986, being MCL 205.54a(h) and 205.94(n) of the Sales Tax and Use Tax, respectively. Newspaper supplements may qualify for the Industrial Processing Exemption as afforded in Sections 205.54a(g) and 205.94(g) of the Sales Tax and Use Tax Acts, respectively. These guidelines are effective September 1, 1985.

A newspaper supplement is defined as a separate advertising supplement that is distributed with a newspaper or periodical. It is not advertising space that is sold in the newspaper or periodical as a regular part of the newspaper. Advertising supplements include political pamphlets, grocery coupons, clothing store ads, etc.

1. Supplements or inserts sold to a newspaper for distribution as a part of the newspaper are not taxable.
   
   Example: An advertiser or retailer submits advertising to a newspaper. The newspaper contracts with a printer to print a supplement or insert that is to be distributed as a part of the newspaper. This is a sale to the newspaper by the printer for distribution in the paper and is not taxable.
    
2. Supplements or inserts sold to an advertiser or retailer and delivered by the printer to the newspaper to be distributed as a part of the newspaper are not taxable.
   
   Example: An advertiser or retailer submits advertising to a printer to print a supplement or insert to be delivered to a newspaper, by the printer, for distribution as a part of the newspaper. The transaction is not taxable.
    
3. Supplements or inserts sold to an advertiser or retailer and delivered to the advertiser or retailer for distribution as a part of the newspaper are taxable.
   
   Example: An advertiser or retailer submits advertising to a printer to print a supplement or insert. The printer delivers the printed supplements to the advertiser or retailer. The advertiser or retailer delivers the supplements to the newspaper for distribution as a part of the newspaper. The transaction is subject to tax, since the printer is making a retail sale of tangible personal property to the advertiser.
    
4. Supplements or inserts sold to an advertiser or retailer and delivered to the advertiser or retailer are taxable.
   
   Example: An advertiser or retailer submits advertising to a printer to print a supplement or insert to be distributed by the advertiser in retail locations. The transaction is subject to tax since the printer is making a retail sale of tangible personal property to the advertiser or retailer.
   
   Example: An advertiser or retailer submits advertising to a newspaper. The newspaper prints the supplement or insert that will not be distributed as a part of the newspaper, but will be delivered to the retailer or advertiser for distribution. The newspaper is making a retail sale of tangible personal property to the advertiser or retailer, and the sale is taxable. If the newspaper is the printer, the sale to the advertiser or retailer is a taxable retail sale.

Industrial Processing Exemption

When a newspaper prints the supplement, an industrial processing exemption is allowed on the percentage of tangible personal property used or consumed in producing the supplement. The newspaper is making an exempt retail sale to the advertiser when the supplement is distributed as part of the paper. The newspaper must remit sales tax on all supplements that are not distributed as part of the newspaper.

When a printer prints the supplement, an industrial processing exemption is allowed for the tangible personal property used or consumed in producing a product for ultimate sale at retail. The printer is making an exempt retail sale to the advertiser or retailer when the supplement is delivered directly to a newspaper. When the printer delivers any or all of the supplements to the advertiser or retailer, the printer must remit sales tax. This applies to printers both inside and outside Michigan, when the out-of-state printer is required to register for collecting and remitting the tax. When the out-of-state printer is not required to register for Michigan tax, the advertiser or retailer must remit use tax to the Department.