Florida Administrative Code › 12 - DEPARTMENT OF REVENUE › 12A - Sales and Use Tax › Chapter 12A-1 - SALES AND USE TAX › Section 12A-1.072 - Advertising Agencies

Current through Reg. 50, No. 138; July 16, 2024
(1) Definitions. The
				following terms and phrases when used in this rule shall have the meaning
				ascribed to them in this subsection, except where the context clearly indicates
				a different meaning.
(a) "Advertising" is the
				expression of an idea created and produced for reproduction and distribution
				through means such as television, radio, Internet, newspapers, newsletters,
				periodicals, trade journals, publications, books, magazines, standardized
				outdoor billboards, direct mail, point-of-sale displays, leaflets, brochures,
				fliers, or package design, and which is designed to promote sales of a
				particular product or service or to enhance the image of the advertiser.
				Advertising includes public service messages that are designed to affect the
				behavior of the public and messages that are political in nature.
(b)
1.
				"Advertising agency" means any firm that is primarily engaged in the business
				of providing advertising materials and services to clients.
2. Examples.
a. Firms that are primarily engaged in
				consulting with their clients about marketing and advertising products or
				services, formulating a marketing plan intended to improve their image or
				increase their market share, and executing those plans, are considered to be
				advertising agencies.
b. Firms that
				are primarily engaged in the business of printing, imprinting, or reproducing
				tangible personal property and firms that are primarily engaged in the business
				of photography or broadcasting are not advertising agencies.
c. Firms that primarily specialize in
				providing pre-press service(s), such as graphic art, color separations, or
				velox providers are not advertising agencies.
d. Firms that primarily provide audio/visual
				production or recording services are not advertising
				agencies.
(c)
				"Firm" means corporation, sole proprietorship, partnership, or limited
				liability company.
(d)
1. "Primarily engaged in the business of
				providing advertising materials and services" means more than 50 percent of its
				gross receipts in the firm's previous tax year were, or in the first tax year
				are budgeted to be, from receipts for the sale of advertising materials and
				services to clients. For purposes of determining whether the firm qualifies
				under this definition, there shall be deducted from gross receipts amounts paid
				by the agency on behalf of its client to a third party for charges such as
				printing, imprinting, reproduction, publishing of tangible personal property,
				broadcasting advertisements, media placement, or other out-sourced activities
				before applying the 50 percent test.
2. Example.
Gross Receipts
$2,754,217.00
Deduct Outsourced Costs
Printing Costs
$726,785.00
Media Costs
$779,613.00
Photography
$33,950.00
Total Outsourced Costs
$1,540,348.00
Difference to apply 50% test
$1,213,869.00
50%
$606,934.50
If more than $606.934.50 is from advertising
							 services, this company qualifies as an advertising agency.
3.
				Example.
Gross Receipts
$2, 754, 217.00
Receipts from In-House Printing
(Cannot be deducted because not outsourced)
$1, 540, 348.00
Difference
$1, 213, 869.00
Amount to apply 50% test
$2, 754, 217.00
50%
$1, 377, 108.50
If even the entire $1, 213, 869.00 is from the provision of
				  advertising services, it is less than 50% of gross receipts. Therefore, this
				  company does not qualify as an advertising agency.
(e) "Advertising materials" means tangible
				personal property sold to an advertising agency, created by an advertising
				agency, or sold by an advertising agency during the course of providing
				advertising services. Examples of advertising materials include: photographs,
				videos containing images, films containing images, veloxes, galleys,
				mechanicals, artwork, illustrations, digital audio tapes, analog tapes, compact
				discs, sketches, layouts, engravings, mats, models, mockups, and digital
				equipment. "Advertising materials" does not include "raw materials."
(f) "Raw materials" means materials or media
				used to create advertising materials. "Raw materials" includes items such as:
				blank film; blank videotapes; art supplies, such as poster board, paper
				products, inks, letters, and paints; stock art; stock photography; prerecorded
				music and sound; stock props; stock costumes; and stock backdrops.
(g) "Advertising services" means services
				rendered by an advertising agency when designing and/or implementing an
				advertising campaign to promote a product, service, idea, concept, issue, or
				the image of a person. This includes services rendered to design and produce
				advertising materials such as: research; design, layout, preliminary and final
				art preparation; placing or arranging for advertising: creative consultation,
				coordination, direction, and supervision; script writing and copywriting;
				editing; and account management services. However, if an advertising campaign
				is planned and prepared, but the client elects not to proceed with the
				production or placement of the advertising, or the client elects to do its own
				placement of the advertising with the media, the agency will still be
				considered to have provided advertising services.
(h) "Promotional goods" means tangible
				personal property used for promotional purposes. Examples of promotional goods
				include displays, display containers, exhibits, newspaper inserts, brochures,
				catalogues, direct mail letters or flats, shirts, hats, pens, pencils, key
				chains, audio tapes, videotapes, compact discs, business cards, or other
				printed goods or materials.
(i)
1. "Acting as agent for its clients pursuant
				to a contract." In order to purchase advertising materials exempt from tax, the
				advertising agency must make purchases on behalf of clients pursuant to a
				contract. A common law principal/agent relationship is not required. The
				existence of a contract to act as agent for a client may be evidenced in the
				advertising agency's book and records by:
a. A
				written contract clearly stating that the advertising agency will act on behalf
				of a client as agent; or
b.
				Documents, such as invoices and purchase orders, by which the agency discloses
				to its suppliers that it is acting on behalf of a client, regardless of whether
				the specific client(s) is identified; or
c. Proof of a course of dealing that would
				establish an agency relationship, such as being on a retainer paid by the
				client.
2. When the
				advertising agency is acting on behalf of its clients pursuant to contract, it
				may purchase advertising materials tax exempt. When tangible personal property
				purchased by the advertising agency is depreciated or capitalized for
				accounting or income tax purposes by the agency, or the advertising agency
				makes use of the property for its own account, the tangible personal property
				is subject to tax.