Section 32.36. Printing and related businesses

(a) The printing exemption. Printing and related businesses are exempt from sales and use taxes in accordance with the following:

(1) Machinery, equipment, parts and supplies used directly in printing. Printing, when engaged in as a business, is included in manufacturing under the TRC and regulations applicable to manufacturers are also applicable to printers. Equipment, machinery—including components of a computer system, accessories, parts and supplies therefor which are used predominantly and directly in the business of printing, regardless of the technology involved, is exempt from tax. Where equipment is used for both exempt and nonexempt purposes, the predominant use test shall determine its tax status. Effective February 7, 1981, foundations used to support equipment, machinery and parts used directly in printing are exempt from tax. See § 32.32 (relating to manufacturing; processing). With the exception of purchases involving improvements to real estate, directly used property may be purchased free of tax upon the presentation to a vendor of a properly executed exemption certificate certifying that the purchase will be directly used in printing—manufacturing. For example, company X has a computer printer and photocopy machine which predominantly supports administrative operations. Neither device qualifies for the printing exemption. Company Y has a print shop operated as a separate profit-center reproducing multiple copies of substantially identical printed matter. The tangible personal property in this print shop which is predominantly used in printing qualifies for the sales tax exemption.

(2) Related businesses. The exemption also applies to businesses related to the printing industry which, although they themselves are not printing, are ‘‘manufacturing’’ within the meaning of section 201(c) of the TRC (72 P. S. § 7201(c)) and thus are not subject to the multiple copy requirement. Businesses include trade binding, engraving, silk screening, typography, including advertising typographers, plate making, color separating, stereotyping, electrotyping, gravure cylinder making, photographic processing and the business of manufacturing page mechanicals, camera ready copy, image carriers or related or component items for sale to printers for use in their printing operations.

(3) Materials incorporated as components into printed matter. The purchase of personal property which will be physically incorporated by the printer as an ingredient or constituent of printed matter and which will be sold in the regular course of business is a purchase for resale. These materials may be purchased by the printer free of tax upon presentation to the vendor of a properly executed exemption certificate certifying that the purchase is for resale.

(4) Inhouse printing. Where the normal business of an entity is other than the business of printing, but the entity also provides its own full service printing requirements, an inhouse printing operation will qualify for the manufacturing exemption if the following apply:

(i) Inhouse printing is to be conducted in a separate and distinct location, utilizing separate and distinct machinery and supplies, devoted predominantly to printing activities.

(ii) Inhouse printing is the responsibility of employes assigned to the job of inhouse printing and whose duties are predominately related to printing activities.

(iii) Separate accounting or interdepartmental billing is provided to reflect the cost of operating inhouse printing activities and to charge these costs against other business activities conducted by the taxpayer.

(iv) Inhouse printing activities are separate and distinct from other business activities and are not an integrated part of general data processing, word processing, copying or other business activity of the taxpayer.

(v) Inhouse printing activities are of sufficient size, scope and character that they could be conducted on a commercially viable basis separate and distinct from other business activities of the taxpayer.

(b) Sales by printer. Sales by printers shall conform with the following:

(1) Generally. Tax shall be collected by a printer upon the sale at retail of taxable printed matter. See § 31.29 (relating to books, printed matter and advertising materials). The tax applies to the charge for printing services.

(2) Printed matter not qualifying as direct mail advertising literature or materials or mail order catalogs. Generally, printers include as an element of the purchase price to customers’ charges for service or labor pertaining to the printing or preparing of the printed matter. Charges for printing, imprinting, engraving, mimeographing, multigraphing, typesetting, addressing, folding, enclosing, packaging and selling are included in the purchase price, and tax shall be collected with respect to charges. Charges, even though separately stated, made by the printer for the mailing or delivering of the finished product to the customer, or a designee, are included as an element of the purchase price. When the finished product involves the use of the United States postal cards or stamped envelopes purchased by the printer, the tax does not apply to the amount of the United States postage imprinted upon the postal card or envelopes if the printer is not required to mail the printed matter to the customer’s designee. If the printer is required to mail the printed matter to the customer’s designee, the value of the postage is taxable upon the basis that it constitutes a charge for the delivery of the postal cards or stamped envelopes. A charge for tear sheets, clippings, reprints and extra proofs is subject to tax.

Example 1: Printer ‘‘A’’ imprints stamped envelopes and brochures not qualifying as direct mail advertising literature or material for his customer ‘‘B.’’ ‘‘A’’ furnishes stamped envelopes and paper for the brochures. The contract requires ‘‘A’’ to return the completed envelopes and brochures to ‘‘B’’ who in turn will mail them to his customers. ‘‘A’’ is required to collect sales tax upon his services for the envelopes, paper, printing charges and cost of delivering the envelopes and brochures to ‘‘B.’’ ‘‘A’’ may separately state the costs of the postage stamps which are not subject to tax.

Example 2: Printer ‘‘A’’ imprints stamped envelopes and brochures not qualifying as direct mail advertising materials or literature for customer ‘‘B.’’ ‘‘A’’ furnishes the stamped envelopes and paper for the brochures. The contract requires ‘‘A’’ to mail the envelopes and brochures to ‘‘B’s’’ customers. ‘‘A’’ is required to collect sales tax upon charges for the envelopes, paper, printing charges and stamps. The value of the stamps represents the delivery charges in conjunction with the sale.

(3) Printed matter qualifying as direct mail advertising materials or mail order catalogs. A charge for the sale of mail order catalogs and direct mail advertising literature or materials is exempt from tax. A charge incidental to the sale of mail order catalogs and direct mail advertising is also exempt from tax. A charge for the delivery postage or mailing of the items to the customer or the customer’s designee is also exempt from tax.

(4) Printing services.

(i) The exemption relating to the purchase of direct mail advertising literature or materials and mail order catalogs is confined to transactions in which the printer provides both the printing service and the material to be imprinted. If the printer performs printing services upon paper, cardboard or other material furnished by the purchaser of the services or a third party, the charges are subject to tax even though the finished product qualifies as direct mail advertising literature or material or mail order catalog.

Example: Printer ‘‘A’’ imprints paper for customer ‘‘X.’’ ‘‘X’’ supplies the paper. The letters are advertisements which will be mailed directly to ‘‘X’s’’ customers. This printing service does not qualify for the direct mail advertising exemption. Accordingly, ‘‘A’’ shall collect and ‘‘X’’ pay sales tax on the total purchase price of the printing service.

(ii) Copy, artwork, photographs, plates, separations and other preparations and image carriers are items which, if provided by the customer, will not cause a charge for printing to be taxable, if the customer does not also supply the material receiving the printing image.

Example: Printer ‘‘A’’ imprints paper for customer ‘‘Y.’’ ‘‘A’’ supplies the paper. ‘‘Y’’ supplies the plates and artwork. The letters are intended to promote business and will be mailed directly to ‘‘Y’s’’ customers. This material does qualify for the direct mail advertising exemption. ‘‘Y’’ is exempt from tax on the charges by ‘‘A.’’

The provisions of this § 32.36 amended through June 28, 1985, effective June 29, 1985, 15 Pa.B. 2389; amended March 19, 1993, effective March 20, 1993, 23 Pa.B. 1322. Immediately preceding text appears at serial pages (149607) to (149608), (152595) to (152596) and (149611).

Notation

Notes of Decisions

Charges for independent vendor printing taxpayer’s publications were exempt from the use tax under the ‘‘direct mail advertising’’ exemption; the court construed the term ‘‘direct’’ in the direct mail advertising exemption to apply not only to advertising materials mailed by the taxpayer directly to prospective purchasers, but also to materials mailed by the vendor that reaches recipients directly following deposit in the mail. Merion Publications, Inc. v Commonwealth, 890 A.2d 436, 443 (Pa. Cmwlth. 2006).

Where outside printer was contracted to perform printing on taxpayer’s premises using printer’s own equipment and employees to perform the printing, taxpayer could not claim sales tax exemption for in-house printing. SEI Investments v. Commonwealth, 890 A.2d 1130, 1137 (Pa. Cmwlth. 2006).

Engineering supplies used by corporation did not qualify for printing exemption to use tax since corporation limited preparation of prints and drawings was solely in connection with manufacture of dies. Oberg Manufacturing Co., Inc. v. Commonwealth, 486 A.2d 1047 (Pa. Cmwlth. 1985).

A manufacturer of electrical products whose inhouse printing operation produces sales brochures, manuals, and reports for use by its own sales personnel, as well as stationery, books, pricing information, buying data, business forms and meter paper for its own electrical products, is engaged in printing as a business with respect to all materials used or consumed by its inhouse printing operation, but not with respect to items printed by outside independent printers. Westinghouse Electric Corporation v. Board of Finance and Revenue, 417 A.2d 800 (Pa. Cmwlth. 1980).

Cross References

This section cited in 61 Pa. Code § 32.25 (relating to steam, gas, electricity, fuel oil and kerosene); and 61 Pa. Code § 60.8 (relating to secretarial and editing services).