Sales Tax Articles
Sales Tax State Activity Update - February 2006
Pennsylvania Applies Plain Language to Direct Mail Advertising
The printing charges for Advance Newsmagazines by a third party independent printer distributed free of charge through the U.S. Postal Service were ruled exempt from sales tax.
Background
The parties stipulated to the facts that the taxpayer publishes a variety of publications referred to as Advance Newsmagazines on a weekly or bi-monthly basis. The publications are devoted to segments of the healthcare industry. Included are stories of interest, employment opportunities, and product and service advertising used by persons in the targeted industries. Upon audit of the taxpayer the Pennsylvania Department of Revenue (Department) assessed use tax on the printing charges for the publications.
The Departments Position
The Department, the Board of Appeals, and the Board of Finance and Revenue (BF&R) concluded that the taxpayer was not entitled to the exemption because it was advertising for other companies rather than on its own behalf. The main thrust of the Department's argument was that the direct mail advertising literature or materials exemption can only apply when sent directly by the vendor to the prospective purchaser.
Taxpayers Position
The taxpayer noted that no dispute exists if its publication constituted printed matter intended to promote business interest, create good will, engage the attention of a recipient, and distributed through the United States Postal service. In light of these points the taxpayer felt the publications constituted advertising literature or material within the definition of 61Pa. Code section 31.29(b). Also direct mail cannot be construed to mean vendor direct because the statute providing the exemption is silent as to whose behalf the advertising must be done.
Ruling
The Court concluded that the taxpayer's construction of the exemption is consistent with the plain language, and the remainder of the statutory scheme. The Departments position was found to be too narrow and the limiting language was simply not present in the statute. The Court also reasoned that if advertising material that is included with a magazine or newspaper is afforded the exemption from tax, clearly in those cases, the advertising is not emanating directly from the vendor to the prospective purchaser. The BF&R order assessing the tax was reversed.
View the full text on the Pennsylvania Judicial System Website.
( Merion Publications, Inc. v. Commonwealth of Pennsylvania, Docket. No. 792 F.R. 2003, 01/11/2006)
Subscribe to CyberTax News and receive the latest indirect tax news, including rate changes, rule updates, compliance issues, and more, delivered directly to your email.
Call 800.355.3500 to Speak to a Sales Representative.
