California Code of Regulations › Title 18 - Public Revenues › Division 2 - California Department of Tax and Fee Administration- Business Taxes (State Board of Equalization- Business Taxes, See Ch. 6 and 9.9) › Chapter 4 - Sales and Use Tax › Article 4 - Graphic Arts and Related Enterprises › Section 1540 - Advertising Agencies and Commercial Artists

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) Definitions.
(1) Advertising. Advertising is commercial
				  communication utilizing one or more forms of communication (such as television,
				  print, billboards, or the Internet) from or on behalf of an identified person
				  to an intended target audience.
(2)
				  Advertising Agencies. Advertising agencies design and implement advertising
				  campaigns for purposes of advertising the goods, services, or ideas of their
				  clients. As part of that primary function, advertising agencies provide their
				  clients with services (such as consultation, consumer research, media planning
				  and placement, public relations, and other marketing activities), and may also
				  provide tangible personal property (such as print advertisements, finished art,
				  and video and audio productions).
(3) Commercial Artists. Commercial artists,
				  who may characterize themselves as commercial artists, commercial
				  photographers, or designers, provide services and tangible personal property to
				  their clients for use in their clients' advertising campaigns, or for their
				  clients' other commercial endeavors such as sales of copies of finished art
				  (including, e.g., photographic images) provided by a commercial artist.
				  Services they provide to their clients include the creation and development of
				  ideas, concepts, looks, or messages. Electronic artwork they provide may be
				  transferred through remote telecommunications such as by modem or over the
				  Internet, or by tangible means through electronic media such as compact or
				  floppy disc. Tangible personal property they provide may include electronic
				  media on which electronic artwork is transferred to the client, hard copies of
				  the electronic artwork, hard copies of finished art (which may consist of
				  photographic images).
(4) Contract
				  of Sale. An agreement to transfer tangible personal property for consideration
				  is a contract of sale. The client may, for example, issue a purchase order for
				  the purchase of tangible personal property. The contract of sale for that
				  tangible personal property consists of the terms of the purchase order together
				  with the relevant terms of the master agreement (defined in subdivision
				  (a)(10)).
(5) Digital Pre-Press
				  Instruction. Digital pre-press instruction is the creation of original
				  information in electronic form by combining more than one computer program into
				  specific instructions or information necessary to prepare and link files for
				  electronic transmission for output to film, plate, or direct to press, which is
				  then transferred on electronic media such as tape or compact disc.
(6) Electronic Artwork. Electronic artwork is
				  artwork created through the use of computer hardware and software processes
				  which results in artwork in a digital format that can be transmitted to others
				  via electronic means (that is, transmitted through remote telecommunications
				  such as by modem or over the Internet, or by electronic media such as compact
				  or floppy disc). Elements of the process include the creation of original
				  artwork or photographic images, scanning of artwork or photographic images,
				  composition and design of text, insertion and manipulation of scanned and
				  original electronic artwork, photographic images, and text. Electronic artwork
				  does not include artwork that is transferred to clients in a tangible form,
				  other than on electronic media, even where such artwork may have been
				  manufactured or produced in whole or in part by computer hardware and software
				  processes.
(7) Finished Art.
				  Finished art is the final artwork used for actual reproduction by
				  photomechanical or other processes, or used for display. It includes electronic
				  artwork, illustrations (e.g. drawings, diagrams, halftones, or color images),
				  photographic images, sculptures, paintings, and handlettering. Blueprints,
				  diagrams, and instructions for signage furnished to a client as the result of
				  environmental graphic design services are not finished art.
(8) Hard Copies. An item is transferred on
				  hard copy when it is transferred on any tangible personal property other than
				  in digital format on electronic media. For example, finished art transferred on
				  canvas or paper is transferred on hard copy while a transfer of finished art in
				  digital format on compact or floppy disc is not regarded as a transfer on hard
				  copy.
(9) Intermediate Production
				  Aids. Intermediate production aids include items such as artwork,
				  illustrations, photograph images, photo engravings, and other similar materials
				  which are used to produce special printing aids or finished art.
(10) Master Agreement. A master agreement is
				  a contract, however characterized (such as "agency-client agreement"), entered
				  into between an advertising agency or commercial artist and its client which
				  specifies the obligations of each party to the master agreement with respect to
				  their relationship, whether for a specified time or advertising campaign or
				  until one of the parties terminates the agreement. A master agreement between
				  an advertising agency and its client may specify the obligations of each with
				  respect to the design of an advertising campaign for the client, the placement
				  of the advertising with print and television media, and for the sale and
				  purchase of tangible personal property related to the advertising campaign.
				  There may then be additional terms for the purchase of specific tangible
				  personal property during the advertising campaign, such as in a purchase order,
				  which identifies the specific property that will be purchased and sold and the
				  sales price for that property.
(11)
				  Preliminary Art. Preliminary art is tangible personal property which is
				  prepared solely for the purpose of demonstrating an idea or message for
				  acceptance by the client before a contract is entered into, or before approval
				  is given, for preparation of finished art provided neither title to, nor
				  permanent possession of, such tangible personal property passes to the client.
				  Examples of preliminary art include roughs, visualizations, layouts,
				  comprehensives, and instant photos.
(12) Special Printing Aids. Special printing
				  aids are reusable manufacturing aids which are used by a printer during the
				  printing process and are of unique utility to a particular client. Special
				  printing aids include electrotypes, stereotypes, photoengravings, silk screens,
				  steel dies, cutting dies, lithographic plates, film, single or multi color
				  separation negatives, and flats.
(13) Third Parties. A reference in this
				  regulation to a transfer to a client also includes a transfer to a third party
				  on the client's behalf. For example, the discussion in subdivision (b)(2)(B)
				  for transfers of finished art by loading into the client's computer also
				  includes transfers of the finished art by loading it into a third party's
				  computer at the instruction of the client.