Iowa Administrative Code › Agency 701 - Revenue Department › Title III - Sales, Use, and Excise Tax › Chapter 221 - Miscellaneous Nontaxable Transactions › Rule 701-221.6 - Advertising Agencies, Commercial Artists and Designers as an Agent or as a Nonagent of a Client

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
In general.
A true agency relationship depends upon the facts
				with respect to each transaction. An agent is one who represents another,
				called the principal, in dealings with third persons. Advertising agencies,
				commercial artists, and designers may act as agents on behalf of their clients
				in dealing with third persons or they may act on their own behalf. To the
				extent advertising agencies, artists and designers act as agents of their
				clients in acquiring tangible personal property, they are neither purchasers of
				the property with respect to the supplier nor sellers of the property with
				respect to their principals.
When advertising agencies, commercial artists, and designers
				  act as agents of their clients in purchasing property for their clients, the
				  tax applies to the sales price from the sale of such property to the
				  advertising agencies, commercial artists, and designers. Unless such
				  advertising agencies, commercial artists and designers act as true agents, they
				  will be regarded as the retailers of tangible personal property furnished to
				  their clients and the tax will apply to the total sales price received for such
				  property. Further, nothing in this rule should be construed to be in variance
				  with the opinion of the Iowa Supreme Court in
Rowe v. Iowa State Tax
				  Commission
, 249 Iowa 1207, 91 N.W.2d 548 (1958).
To establish that a particular acquisition is made in the
				  capacity of an agent for a client, advertising agencies, commercial artists,
				  and designers (collectively referred to herein as "agency") shall act as
				  follows:
a. The agency must clearly
				disclose to the supplier the name of the client for whom the agency is acting
				as an agent.
b. The agency must
				obtain, prior to the acquisition, and retain written evidence of agent status
				with the client.
c. The price
				billed to the client, exclusive of any agency fee, must be the same as the
				amount paid to the supplier. The agency may make no use of the property for its
				own account, such as commingling the property of a client with another, and the
				reimbursement for the property should be separately invoiced or shown
				separately on the invoice to the client.
Some charges may represent reimbursement for tangible
				  personal property acquired by the agency as agents for its clients and
				  compensation for performing of agency services related thereto. When an
				  advertising agency, commercial artist, or designer establishes that it has
				  acquired tangible personal property as agents for its clients, tax does not
				  apply to the charge made by the agency to its client for reimbursement charges
				  by a supplier or to the charges made for the performance of the agency's
				  services directly related to the acquisition of personal property.
Advertising agencies, commercial artists, and designers
				  acting as agents shall not issue resale certificates to suppliers.
Advertising agencies, commercial artists, and designers act
				  as retailers of all items of tangible personal property produced or fabricated
				  by their own employees when they sell to their clients. Advertising agencies,
				  commercial artists, and designers are not agents of their clients with respect
				  to the acquisition of materials incorporated into items of tangible personal
				  property prepared by their employees and sold at retail to their
				  clients.