Direct Mail Advertising and Sales Tax Challenges:

Transcription

1 Presenting a live 110 minute teleconference with interactive Q&A Direct Mail Advertising and Sales Tax Challenges: Latest Developments With Differing State Policies Tracking and Managing Exemption, Nexus, Sourcing, Use Tax and Other Related Issues THURSDAY, AUGUST 23, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Matthew Schaefer, State and Local Tax Partner, Brann & Isaacson,, Lewiston, Maine Martin Eisenstein, Member, Brann & Isaacson, Lewiston, Maine For this program, attendees must listen to the audio over the telephone. Please refer to the instructions ed to the registrant for the dial-in information. Attendees can still view the presentation slides online. If you have any questions, please contact Customer Service at ext. 10.

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5 Direct Mail Advertising and Sales Tax Challenges: Latest t Developments With Differing State Policies Seminar Aug. 23, 2012 Martin I. Eisenstein, Brann & Isaacson meisenstein@brannlaw.com Matthew P. Schaefer, Brann & Isaacson mschaefer@brannlaw.com

6 Today s Program Foundational Concepts Slide 7 Slide 24 [Matthew Schaefer] Latest State Actions Affecting Direct Mail [Matthew Schaefer] Examples of Specific States [Martin Eisenstein] Slide 25 Slide 34 Slide 35 Slide 41 Nexus Issues [Martin Eisenstein] Slide 42 Slide 57 Taxability bl of Postage/Shipping Slide ld 58 Slide ld 62 [Martin Eisenstein]

7 Matthew P. Schaefer, Brann & Isaacson FOUNDATIONAL CONCEPTS

8 How Do States Define Direct Mail? Streamlined Sales and Use Tax Agreement (SSUTA) definition Direct mail means printed material delivered or distributed by U.S. mail or other delivery service to a mass audience or to addressees on a mailing list provided by the purchaser or at the direction of the purchaser, when the cost of the items are not billed directly to the recipients. Direct mail includes tangible personal property supplied directly or indirectly by the purchaser to the direct mail seller for inclusion in the package containing the printed material. Direct mail does not include multiple items of printed material delivered to a single address. (underlining added) Applicable in nearly 25 states t 8

9 How Do States Define Direct Mail? (Cont.) Other states define a broader category of materials (e.g., promotional materials ) or a narrower subset (e.g., cooperative direct mail) for particular tax treatment. Some states have no specific definition and treat direct mail largely like they do other tangible personal property. 9

10 Greater Regulatory Focus On Promotional Direct Mail SSUTA subcategories Advertising and promotional direct mail : Printed material that meets the SSUTA definition of direct mail, the primary purpose of which is to attract public attention ti to a product, person, business or organization, or to attempt to sell, popularize or secure financial support for a product [or service], person, business or organization Other direct mail : Any direct mail that is not advertising and promotional direct mail, regardless of whether advertising i and promotional direct mail is included d in the same mailing Several non-ssuta states have specific treatment for promotional direct mail. 10

11 What Is The SSUTA? A. A multi-state t t compact among participating i states, t each of which h must substantially conform its laws to the terms of the Agreement. B. It is the purpose of this Agreement to simplify and modernize sales and use tax administration i ti in the member states t in order to substantially reduce the burden of tax compliance. C. Twenty-four member states (25 on 10/1/12, when Utah joins) 1. Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Rhode Island, South Dakota, Tennessee, Utah, Vermont, Washington, West Virginia, i Wisconsin, Wyoming D. Conforming legislation frequently introduced in other states 11

12 Examples Of Types Of Direct Mail Materials These items are generally considered to be advertising/promotional direct mail, although some may be excluded in certain jurisdictions: Mail order catalogs Flyers/brochures Advertising i circulars/newspaper inserts Coupons (sometimes cooperative direct mail) Advertising folders, envelopes These items are generally not considered to be advertising/promotional direct mail, but some may qualify in certain jurisdictions: Non-printed advertising materials such as video tapes, computer disks, refrigerator magnets, etc. (unless they fall within a state s definition of promotional materials) Billing invoices/account statements Stockholder reports Legally required mailings Privacy notices 12

13 Overview Of Taxability Of Direct Mail As tangible personal property, direct mail is presumptively subject to state and local use tax, unless an exemption applies. A number of large states have exemptions for some types of direct mail (e.g., CA, NY, PA, OH, IL, VA). SSUTA member states all subject direct mail to tax (with exceptions for specific types in Wisconsin and Oklahoma). In some cases, the purchase of services associated with the production or delivery of direct mail may not be taxable (e.g., advertising or letter shop services). But, this seminar focuses primarily on the tax treatment of the tangible mail pieces. 13

14 Delivery Charges For Direct Mail As a percentage of the total cost of a transaction, shipping/transportation/postage is typically much higher for direct mail than for other products (such as consumer goods). Many states exclude separately stated delivery charges from the sales price, for purposes of calculating sales and use tax. The SSUTA permits its members to have special rules for the tax treatment of delivery charges for direct mail. 14

15 Delivery Charges For Direct Mail (Cont.) A. Under the SSUTA, unless delivery charges are stated separately on the invoice, they are not eligible for exclusion from sales tax. B. If delivery charges are stated separately, SSUTA member states can choose whether to exclude them from sales tax, or to exclude specific aspects of delivery charges: 1. Handling, crating, packing, preparation p for mailing or delivery, and similar charges 2. Transportation, shipping and similar charges 3. Postage 15

16 Exemptions Available By Statute, As Well As Under Court And Administrative Decisions A. Statutory exemptions: 1. California printed sales messages exemption (Cal. Rev. & Tax. Code ; Cal. Code Regs ) 2. New York promotional materials exemption (NY Tax Law 1115(n)(4)) 3. Massachusetts direct and cooperative direct mail promotional advertising materials exemption (Mass. Gen. L. Chap. 64H, 6(ff)) B. Exemptions by court decision i or administrative i ti ruling for materials delivered from outside the state by U.S. mail: 1. Michigan (Sharper Image Corp. v. Department of Treasury, 550 N.W.2d 596 (Mich. App. 1996)) 2. Illinois (see Ill. Department of Revenue, General Information Letter ST GIL (Jan. 5, 2000)) 3. Virginia (see Ruling of Virginia Tax Commissioner, P.D (Feb )) 16

17 Typical Tax Issues For Purchasers Is my company subject to a sales/use tax obligation in the state(s) where we are mailing? Do direct mail materials qualify for an exemption and if so, in which jurisdictions? What is the correct exemption certificate to issue the printer, where applicable? Is postage/shipping pp g exempt and if so, in which jurisdictions? Does the printer charge tax, where applicable? Will my company s IT system properly accrue the correct use tax, where applicable, if the printer does not charge the appropriate tax? Are there storage issues with direct mail advertising literature or materials? 17

18 Typical Tax Issues For Printers Is my company required to collect the state s sales/use tax? Have we obtained a direct pay or exemption certificate? Does my company have nexus in the state? Does the purchaser have nexus? Does the mailing list received from my customer contain the information needed to comply with sourcing rules? Does my billing system have the ability to charge the appropriate tax for each jurisdiction? Are there storage issues with direct mail materials? 18

19 Sourcing Issues What state s (and possibly locality s) law applies to determine if tax is due? Which party the seller or the purchaser bears the responsibility for determining and collecting/reporting the applicable tax? 19

20 Sourcing Issues: Taxability The majority rule is destination sourcing, i.e., the sales/use tax is determined under the law of the jurisdiction where the tangible materials are ultimately t l delivered. d For example, the SSUTA generally provides for destination sourcing (SSUTA, Section 313), but The SSUTA permits origin i sourcing, under which h the sales/use tax is determined based on the point of sale, for intrastate sales (but adopted so far by only two member states). (SSUTA, Sect ) 1) 20

21 Sourcing Issues: Taxability (Cont.) In addition, several non-ssuta states (e.g., AZ, IL, PA, TX) have a general rule that calls for origin sourcing. However: Such origin sourcing rules may apply only to intrastate transactions/deliveries, and In the case of interstate sales, including the delivery of direct mail to other states, such rules are typically superseded by express exemptions, rules or enforcement practices that acknowledge underlying constitutional principles applicable to interstate commerce (and thus result in destination sourcing based on the use of direct mail in the state(s) () where it is delivered). 21

22 Sourcing Issues: Taxability (Cont.) The structure of a direct mail transaction may create challenges in determining what state s law applies. If a printer does not also arrange for mailing to end user recipients, but instead delivers in bulk to a purchaser or letter shop to complete the mailing, then the purchase of direct mail may be viewed as a bulk sale. If a printer lacks sufficient information to allocate and source a sale of direct mail based on the delivery location(s), the printer may be required to collect sales tax under a default assumption. The SSUTA requires the printer to source to the shipping location for advertising and promotional direct mail, and to the address of the purchaser for other direct mail. (SSUTA, Section 313.A.4, B.1) Non-SSUTA states may vary, creating challenges for the printer. 22

23 Sourcing Issues: Who Must Report? Typically, a seller must determine sourcing and collect any applicable sales/use tax. (Note: The purchaser is only relieved of the obligation if the seller collects.) Because direct mail is delivered to multiple jurisdictions, as to which the seller may have insufficient information for tax purposes, direct mail presents potential difficulties for the seller. The SSUTA, and some non-ssuta states, offer procedures or exemptions that place sourcing and reporting burdens on the purchaser. 23

24 Sourcing Issues: Who Must Report? (Cont.) Under the SSUTA, a seller is relieved of the obligation to collect tax when the purchaser provides a direct pay permit or a direct mail certificate indicating that the purchaser will report tax. (SSUTA, Section 313.A.2, B.2) Some states provide express exemptions from tax for direct mail materials delivered to locations outside the state. (Such exemptions do not mean that the destination state s tax is inapplicable, however.) The issue may be complicated where a purchaser lacks nexus in the destination state(s). 24

25 Matthew P. Schaefer, Brann & Isaacson LATEST STATE ACTIONS AFFECTING DIRECT MAIL

26 Expanded Catalog Exemption In Wisconsin Existing statutory provisions ( 77.54(15), 77.54(25m)) exempt specific categories of direct mail materials, including in particular catalogs. Wis. Stat (59) expands the exemption, effective July 1, 2013, to encompass all advertising and promotional direct mail. Exempt from sales and use tax is [t]he sales price from the sales of and the storage, use, or other consumption of advertising and promotional direct mail. SSUTA definition (same as Wis. Stat (1ag)): Advertising and promotional direct mail means direct mail that has the primary purpose of attracting public attention to a product, person, business, or organization or to attempt to sell, popularize, or secure financial support for a product, person, business, or organization. 26

27 Val Pak East Valley, Inc. v. Arizona Dept. Of Revenue Vendor/franchisee of cooperative direct mail advertising argued that it was not subject to sales/use tax on direct mail materials distributed in Arizona. Val-Pak East Valley assembled orders for advertising flyers and coupons, then sent orders to a Florida affiliate. Affiliate created, packaged and mailed envelopes containing flyers and coupons to Arizona residents from out-of-state. 27

28 Val Pak East Valley v. Arizona Dept. of Revenue (Cont.) Arizona Court of Appeals agreed that no sales/use tax was due, on two grounds: First, the Court agreed that under the dominant purpose and common understanding tests, Val-Pak East Valley was purchasing non-taxable design, printing, and mailing services, not taxable tangible personal property, from its Florida affiliate. 28

29 Val Pak East Valley v. Arizona Dept. Of Revenue (Cont.) Second, the Court rejected the department s argument that Val-Pak East Valley controlled the distribution of the direct mail pieces. Affiliate purchased all physical supplies (e.g. paper, ink, envelopes, postage, etc.), and had control over design and creation of catalogs. Decision contrasted Val-Pak East Valley s business with retailers control over catalog distribution in earlier Service Merchandise (1996) case, refined in Sharper Image (1998) case. The Court found that Val-Pak is exempt because it is not exercising any right or power over tangible personal property incidental to owning the property. 29

30 Extension Of Virginia i i Exemptions Virginia has three established statutory exemptions, recently extended by the Virginia General Assembly (Senate Bill 393 (Chapter 477) amending VA Code Ann ) The bill leaves in place the exemption for direct mail such as catalogs, letters, brochures and reports when stored at a Virginia printer for less than 12 months and then distributed outside the state (but envelopes, containers, labels and paper are not exempt). In addition, the statute continues a sales and use tax exemption applicable to the purchase of printing/printed materials by advertising businesses, when the resulting printed material is distributed outside Virginia within 12 months. Finally, the exemption for advertising businesses that purchase newspaper or magazine inserts for distribution ib ti is extended d from July 1, 2012 to July l 1, According to the Taxation Department, newspaper supplements purchased by advertising agencies for placement in in-state or out-of-state publications are also exempt. (Virginia Department of Taxation Legislative Summary 2012) 30

31 Indiana Department of State Revenue v. AOL, LLC Under prior Indiana Tax Court decisions (Ameritech I (2006) and Ameritech II (2009)), Indiana law provided an exemption for direct mail materials when the purchaser supplied raw materials that were entirely consumed by the vendor in producing the final product distributed to recipients in the state. In this case, AOL contracted for the creation and distribution of promotional materials to recipients in Indiana by third- party contractors. t 31

32 Indiana Department of State Revenue v. AOL, LLC (Cont.) AOL argued that it had acquired raw goods that it supplied to its vendors, then paid for assembly and printing services, and did not acquire the finished promotional direct mail materials in any retail transaction. ti The Indiana Supreme Court held that AOL was subject to use tax on the direct mail materials. In response to the argument that AOL was purchasing services as opposed to tangible personal property, the court ruled that the assembly houses and letter shops were selling at retail, despite the fact that AOL supplied the raw material. Because it found that AOL acquired goods in a retail transaction, the court ruled that use tax applied when AOL used the goods in Indiana. 32

33 Direct Mail Sourcing In Oklahoma The Oklahoma Tax Commission recently amended its rule regarding direct mail sourcing to adopt definitions of advertising and promotional direct mail and other direct mail, in accordance with the SSUTA (Okla. Rule 710: ). The revised rule makes clear that advertising and promotional direct mail is taxable and sourced in accordance with the SSUTA (Sect. 313). The rule states that other direct mail is not taxable under Oklahoma law. Therefore, no sourcing rules are specified. 33

34 West Virginia i i SSUTA Matrix For a number of years, it was the practice of the West Virginia Revenue Department to allow the exclusion of postage charges from the tax base for direct mail. In connection with its membership to the SSUTA, the department has stated, and revised its taxability matrix to reflect, that all delivery related charges, including postage, associated with direct mail are subject to sales/use tax. 34

35 Martin I. Eisenstein, Brann & Isaacson EXAMPLES OF SPECIFIC STATES

36 Examples Of Specific States: Pennsylvania Statute (72 P.S. 7204(35)) exempts: Mail order catalogs Advertising literature or materials, which are defined as tangible personal property that is intended to promote business interest, create goodwill or engage the attention or interest of a recipient, which includes envelopes, address labels, reply envelopes and application forms (Reg. Sect ) Advertising inserts as part of a newspaper One-time use of a list of names (list rental) and mailing addresses 36

37 Examples Of Specific States: Pennsylvania (Cont.) Key requirement: Distributed through the U.S. Postal Service Will be deemed taxable if distributed by other means (See Reg. Sect ) Key exclusion from exemption: If the advertiser supplies paper, printing charges are subject to sales tax and direct advertising exemption does not apply (61 Pa. ADC 32.36). 36) Quaere whether printing on advertiser-supplied paper outside of Pennsylvania is subject to use tax. Note: No requirement that advertiser be the mailer Merion Publications, Inc. v. Commonwealth, 890 A.2d 436 (Commonwealth Court 2006) 37

38 Examples Of Specific States: Florida Statute (Fla. Stat (7)(w)) exempts: Free Circulated publications Published on a regular basis Composed of primarily advertising Distributed through the mail, home delivery or newsstand Department strictly construes exemption 38

39 Examples Of Specific States: Florida (Cont.) Catalogs and other direct advertising materials arguably fit within this definition. The biggest issue regarding promotional materials is showing regular basis. Department argues that catalogs distributed on different days in a month, from year to year, may not meet the regularity requirement. 39

40 Examples Of Specific States: Ohio Statute exempts sales on which: (1) The purpose of the consumer is to use or consume the things transferred in making retail sales; and (2) The items are newspaper inserts, catalogs, coupons, flyers, gift certificates or other advertising material that prices and describes tangible personal property offered for retail sale. (Rev. Code Ann. Sec (B)(35)) Also exempts printed matter that offers free merchandise or chances to win a sweepstakes, if mailed to potential customers with materials described in the first bullet 40

41 Examples Of Specific States: Ohio (Cont.) Distribution ib ti by taxpayer to retail stores of store displays does not satisfy the requirement that the consumer use the materials transferred in making retail sales Opinion of Tax Commissioner Ohio statute suggests requirements that materials be distributed by advertiser to consumer for ordering. This contrasts with PA statute. 41

42 Martin I. Eisenstein, Brann & Isaacson NEXUS ISSUES

43 Nexus Issues: General Quill (504 U.S. 298 (1992)) sets the constitutional standard. Quill requires that t a retailer have a physical presence. Through its own employees, properties or facilities Attribution nexus: Agent/representative 43

44 Nexus Issues: General (Cont.) Quill states (quoting Bellas Hess): There is a sharp distinction between mail-order sellers with retail outlets, solicitors, or property within a state and those who do more than communicate with customers in the state by and or common carrier as a part of general interstate business. (505 U.S. at 307) (emphasis added) Few court cases regard presence of inventory. Advance Magazine Publishers, s, Inc. v. Huddleston,, Chancery Court, 20 th Judicial District (Tennessee), , (Aug. 20, 1997) Presence of inventory of paper at printer does not establish franchise tax nexus. But, see statement in Quill that Quill did not have nexus because it did not own tangible personal property; also, see AOL v. Johnson (Tenn. Ct. App. 2002) (presence of modems in state creates nexus) 44

45 Nexus Implications i To Mailer Storage of paper p Most large promotional materials mailers contract with paper brokers or directly with mills to purchase paper, and cause paper to be supplied to the printer or printers. Paper must be stored at the printer for short or longer periods. Storage of paper creates a high nexus risk in the state of the printer, but an argument can be made otherwise. See previous slide Does the activity make a market in the state for the out-of-state mailer? (see Tyler Pipe Industries, Inc. v. WA. State Dept. of Revenue, 483 U.S. 232 (1987)) 45

46 Nexus Implications To Mailer (Cont.) Solutions Transfer of title to printer Accomplished with bill of sale to printer Invoice price from printer includes cost of paper (Avoid up-charge or paper p management fee) Issues Requires accounting for paper Credit risk? Is there economic substance? 46

47 Nexus Implications To Mailer (Cont.) Solutions re: paper storage: Print in states t with safe harbors STATE STATUTE REGULATION CODE Connecticut CGA (15)(b), ), (a)(20)(B) ()( )() Florida FL ST (2), (2)(d) Technical Assistance Advisement, No. 06A 03 Georgia OCGA Illinois 35 ILCS 105/2(1), 35 ILCS 5/205(f) Indiana IN Code , , Kentucky KRS (2), (13) Maine 36 MRSA 1754 B(1)(G)(5) Minnesota MN ST 297A.66 (Subdivision 3)(b) 47

48 Nexus Implications To Mailer (Cont.) Solutions re: paper storage: Print in states t with safe harbors STATE STATUTE REGULATION CODE Ohio ORC , (D), b Oklahoma 68 OS 1376 Pennsylvania 72 PS 7201 South Carolina SC Code , Utah UT Code (2) Virginia VA Code (7), (D) West Virginia TAA Wisconsin WSA 77.51(13h), 71.23(3) 48

49 Nexus Implications To Mailer (Cont.) Possible limitations on safe harbors Maine and Minnesota do not specifically permit storage of paper at printer. Storage of catalogs is not necessarily exempt. Don t take title to catalogs or mailings until sent by interstate commerce, not when invoiced by printer. Visits by personnel of mailer to state may not be protected in Florida, Georgia, Kentucky, Maine and Minnesota; because the safe harbor in the statute doesn t address whether visits create nexus. Constitutional argument: Infrequent visits to state don t create nexus. (See Dept of Rev. v. Share International, Inc. 676 So.2d (Fla. 1996), Appeal of Intercard, Inc., 14 P.3d 1111 (Kan. 2000) but see Orvis Co., Inc. v. Tax App. Tribunal of New York 654 N.E.2d 954 (N.Y. 1995)) 49

50 Nexus Implications To Mailer (Cont.) Potential issues: When work is done in more than one state, of which one state has a safe harbor and the other state does not; for example, one facility prints pages 1-25, and facility in another state t prints the remaining i pages Make sure that the contract specifies that the printing facility in the safe state is responsible for the printing job, including mailing of materials. Useful tips: Include anti-agency clauses in contracts Don t store catalogs or promotional materials with printers unless, based on review of statute, it is safe to do so. A contract with printer should specify states where printing takes place. 50

51 Other Nexus Implications To Mailer Basic principle: Mailing promotional materials from outside of state into a state does not create nexus in the destination state. But, distributing promotional materials in a state may create nexus. Example: Catalogs at trade shows or kiosks Example: Coupons Tax authorities could argue that the person distributing is an agent or representative soliciting sales in the state; i.e. the person is helping to make a market in the state for the advertiser. See Borders Online, LLC v. Cal. Board of Equalization, 129 Cal.App. 4 th 1129 (Cal. App. 2005) and the Appeal of Scholastic Book Clubs, Inc., 920 P2d 947 (Kan. 1996) Electronic catalogs California statute in effect on Sept. 15, 2012 (Act ABX1-28 to amend Ca. Rev. and Tax. Code 6203) If not commission-based, then does not create nexus 51

52 Lack Of Nexus Of Mailer: Is Tax Due From The Printer? The problem: Printers frequently have nexus with many states other those in which printing takes place. Is a printer required to collect tax on promotional materials mailed/sent to a state where the mailer does not have nexus? For a state other than one in which materials are printed, i.e. a use tax 52

53 Lack Of Nexus Of Mailer: Is Use Tax Due From The Printer? (Cont.) Constitutional argument against use tax in destination states because of lack of substantial nexus with transaction under Complete Auto Transit four-prong test: Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977); also D.H. Holmes Company, Ltd. v. McNamara, 486 U.S. 24 (1988) based on nexus aplenty of the purchaser of catalogs Most state laws impose use tax on purchaser and require the seller to collect. Argument is that since tax cannot be imposed on the purchaser, printer has nothing to collect. 53

54 Lack Of Nexus Of Mailer: Is Sales Tax Due? Is the situation different for catalogs shipped within the state where the printer s facility is located? Arguably a difference, since this is a sales tax The state has a substantial nexus with the transaction. But, if sales tax under the statute is imposed on the purchaser and not the seller, then the argument is that like the use tax, a sales tax should not be imposed on the purchaser since it does not have nexus with the state. Conclusion: It is critical for printers and mailers to determine the kind of tax at issue (sales tax or use tax) and the incidence of the tax. 54

55 Lack Of Nexus Of Mailer: Is Use Tax Due? Most printers permit a no nexus letter or accept an exemption certificate that is a variation of the MTC Multijurisdictional Tax Certificate or the SSTUA Exemption Certificate (see attached). 55

56 Lack Of Nexus Of Mailer: Is Use Tax Due? (Cont.) Sect. 317 of SSTA, and Rule 317.1, provide that a seller is relieved of liability if it obtains a fully completed paper exemption certificate or an electronic filing that has all of the information contained in the SSTA form. Sect. 5 of SSTA form provides an exemption category (L) of "Other. Lack of nexus can be deemed Other. 56

57 Lack Of Nexus Of Mailer: Is Use Tax Due? (Cont.) Does the lack of nexus constitute an adequate basis for an exemption certificate? Most state laws provide an exemption or exclusion from tax, if imposition of tax is unconstitutional. See, e.g., Code of Iowa 423.3; WY Statutes (a)(i)(A) Good faith basis for printer to receive such a certificate 57

58 Martin I. Eisenstein, Brann & Isaacson TAXABILITY OF POSTAGE/SHIPPING

59 Taxability Of Postage/Shipping g STATE SALES TAX ON SHIPPING COSTS Alabama Excluded if (1) shipped by common carrier and (2) charges are billed separately and paid by the purchaser Arizona Excluded if charges are separately stated Arkansas Excluded if charges are separately stated California Excluded for separately stated charges if shipping directly to the purchaser by common carrier, USPS or independent d contractor t Colorado Excluded if charges are both (1) separable from the sales transaction, and (2) stated separately on a written invoice or contract Connecticut Taxable District of Columbia Excluded dif charges are separately tl stated, ttdand dli delivery occurs after the sale Florida Excluded if charges are (1) separately stated and (2) may be avoided by a decision or action solely on the part of the purchaser Georgia Taxable Hawaii Taxable Idaho Excluded if charges are separately stated Illinois Likely taxable Indiana Taxable 59

60 Taxability Of Postage/Shipping (Cont.) STATE Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota SALES TAX ON SHIPPING COSTS Excluded if charges are separately contracted for and separately stated Taxable Taxable Excluded if charges are separately stated, and delivery occurs after the sale Excluded if (1) shipment is made direct to the purchaser, (2) charges are separately stated, and (3) the transportation occurs by means of common carrier, contract carrier or USPS Excluded if separately stated Excluded if charges (1) reflect the costs of preparing and delivering goods to a location designated by the purchaser, (2) are separately stated on the bill, and (3) are set in good faith and reasonably reflect the actual costs incurred by the vendor Excluded if charges are separately stated Excluded if charges are separately stated 60

61 Taxability Of Postage/Shipping (Cont.) STATE SALES TAX ON SHIPPING COSTS Mississippi Missouri Nebraska Nevada New Jersey New Mexico New York North Carolina Ohio Oklahoma Pennsylvania Rhode Island South Carolina Taxable Excluded if the charges are (1) separately stated and (2) not required to pay the delivery service price as part of the sale price (i.e., shipping service is optional) Taxable Excluded if the charges are separately stated Taxable Taxable Not taxable; separately stated charges to ship promotional materials are not taxable Excluded if charges are separately stated Not taxable if fit within direct advertising exemption Excluded if separately stated on invoice Not taxable if direct billing to customer by UPS or if subject to direct advertising exemption Excluded if charges are separately stated, except for envelopes Cooperative direct mail advertising materials are excluded. 61

62 Taxability Of Postage/Shipping (Cont.) STATE South Dakota Tennessee Texas Utah SALES TAX ON SHIPPING COSTS Taxable, except for postage Excluded if charges are separately stated Taxable, except for postage Excluded if charges are separately stated Vermont Excluded if charges are separately stated Virginia Excluded if charges are separately stated Washington Excluded if charges are separately stated West Virginia i i Taxable Wisconsin Excluded if charges are separately stated Wyoming Excluded if interstate delivery 62

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