Current through Register Vol. 48, No. 12, March 22, 2024
a)
Classification of Businesses
Falling into the classification of persons engaged in the
graphic arts or related occupations are printers, book binders, typographers,
portrait or commercial photographers, commercial artists, portrait painters,
sign painters, photostaters, and blueprinters. This list is illustrative, but
not exhaustive. Persons falling under this Part may or may not qualify for the
graphic arts machinery and equipment exemption set forth in Section
130.330(g).
b) Persons Engaged in the Graphic Arts - When
Liable For Tax
1) Persons engaged in the
graphic arts or related occupations may, under certain circumstances, be
considered to be engaged in the business of selling tangible personal property
to purchasers for use or consumption, in which event they incur retailers'
occupation tax liability. This is the case, for example, when they sell to
purchasers for use or consumption tangible personal property which is standard
enough to be stocked for sale or offered for sale from catalogues or other
sales literature, or which otherwise is sold at retail apart from the seller's
engaging in a service occupation. Illustrations would include legal forms,
stock or standard greeting cards, pictures or other items which are stocked for
sale or offered for sale to the public generally, or products of
photoprocessing.
2) Effective
August 1, 1961, a person who is engaged in the graphic arts also incurs
retailers' occupation tax liability on receipts from sales, to users, of items
which such person produces on special order if such item serves substantially
the same function as stock or standard items of tangible personal property that
are sold at retail. Items which "serve substantially the same function" are
those which, when produced on special order, could be sold substantially as
produced to someone other than the original purchaser at substantially the same
price. A printed item that is personalized is always considered to be printed
on special order.
3) Effective
September 1, 1988, photographers, film makers, and other servicemen, are
subject to retailers' occupation tax on the photoprocessing component of their
total service charge when they sell products of photoprocessing. The tax on the
photoprocessing component will apply regardless of whether the photographer
performs the photoprocessing in-house or engages a third-party photoprocessor.
For purposes of the tax imposed on photographs, negatives and positives
by the
Act, photoprocessing includes, but is not limited to,
developing films, positives, negatives, and transparencies, as well as
tinting, coloring, making, and enlarging prints. Photoprocessing does
not include color separation, typesetting, and platemaking by photographic
means in the graphic arts industry and does not include any procedure, process,
or activity connected with the creation of the images on the film from which
the negatives, positives, or photographs are derived. The charge for in-house
photoprocessing may not be less than the photoprocessor's cost price of
materials. In transactions in which products of photoprocessing are sold in
conjunction with other services, if a charge for the photoprocessing component
is not separately stated, tax is imposed on 50% of the entire selling price
unless the sale is made by a professional photographer, in which case tax shall
be imposed on 10% of the entire selling price. [35 ILCS
120/2-15] The tax on photoprocessing may be paid when
purchasing self-developing film, such as Polaroid, or film which includes
photoprocessing charges in the purchase of the film.
A) EXAMPLE: The professional photographer
receives an assignment to shoot a specified layout from an advertising agency.
The photographer selects the location, hires the models, arranges for the
make-up, rents the equipment and shoots the scene. The photographer sends the
undeveloped film to an outside photoprocessing laboratory for development. The
photographer's bill for the sale of the photograph includes a charge for the
photographer's artistic and other services and a separately-stated charge for
the photoprocessing component which is either the charge made to the
photographer by the photoprocessing laboratory or such an amount plus the
photographer's customary mark-up. The tax should only be applied to the
photoprocessing component.
B)
EXAMPLE: The same facts as above except the professional photographer does not
separately state a charge for the photoprocessing component and bills the
client a lump sum. A tax is collected on 10% of the lump sum price.
C) EXAMPLE: A portrait photographer
photographs a family in the photographer's studio and develops the film
in-house. The photographer's bill includes a sitting fee and a
separately-stated charge for the product of photoprocessing. A tax is collected
on the photoprocessing charge only.
D) EXAMPLE: A photographer develops exposed
film and transfers negatives and prints to a consumer. Tax is collected on the
entire bill.
E) EXAMPLE: An
advertising agency prepares advertising brochures for a customer using images
provided by the customer on film, which the advertising agency develops,
enlarges, and prints. The photoprocessing component is not separately stated on
the bill. Tax is based upon 50% of the bill.
c) Persons Engaged in the Graphic Arts - When
Not Liable For Tax
1) A photostater who is
employed to reproduce material for a customer by the photostating process, or a
printer who is employed to print material for a customer in accordance with
copy supplied to the printer by the customer or otherwise in accordance with
the customer's specifications and special order, or a person who otherwise
engages primarily in the transaction in furnishing graphic arts' services is
not engaged in such transaction in the business of selling tangible personal
property within the meaning of the Act, if the item so produced does not serve
substantially the same function as stock or standard items of tangible personal
property that are sold at retail, but is engaged in such transaction primarily
in a service occupation. For example, a printer that is hired by a customer to
print personalized wedding invitations or greeting cards is engaged in the
transaction as a serviceman.
2) To
the extent to which any such person engages in a service occupation, the person
is not liable for retailers' occupation tax on the receipts therefrom,
including receipts from both labor and tangible personal property. (For further
illustrations, see Section
130.1995(b) of
this Part.)
3) If the tax exemption
described in this Section would otherwise apply, the person supplying the
printed item or other item that is produced through the graphic arts' processes
to the user will not lose that exemption because of the fact that the person
outsources the work of producing the item to someone else.
d) Suppliers of Persons Engaged in the
Graphic Arts - When Liable For Tax
1) When
persons who are engaged in the business of selling tangible personal property
sell any such tangible personal property, for use or consumption, to persons
engaged in the graphic arts or related occupations, such vendors incur
retailers' occupation tax liability unless such purchases qualify for the
graphic arts Machinery and Equipment Exemption (see Section
130.330(g)).
This class of sales includes, but is not limited to, sales of machinery, tools,
equipment, office supplies and other tangible personal property which the
purchasers retain and use or consume. This class of sales also includes sales
of plates, film, pre-sensitized plates, alcohol, chemicals, etc., which are
consumed by those engaged in the graphic arts or related occupations in the
course of the performance of their work.
2) It is not material whether the plates,
film, pre-sensitized plates, alcohol, chemicals, etc., are consumed in the
course of producing, by the graphic arts' processes, items which have a
commercial value, or whether the plates, film, pre-sensitized plates, alcohol,
chemicals, etc., are consumed in producing, on special order, items of
noncommercial value.
3) Likewise,
this class of sales includes sales of film to photographers who use such film
in producing negatives which remain the property of such
photographers.
4) Furthermore, this
class of sales includes sales of paper stock, ink, duplicating materials
(stencil sheet masters, offset masters and spirit masters) and other tangible
personal property to printers and other graphic arts' servicemen who
incorporate such tangible personal property as ingredients into items which
remain the property of such servicemen instead of being resold by them in some
manner.
e) Suppliers of
Persons Engaged in the Graphic Arts - When Not Liable For Tax
1) Persons who sell tangible personal
property to persons who are engaged in the graphic arts or related occupations
and who resell such property to others are not required to remit retailers'
occupation tax measured by their gross receipts from such sales. This class of
sales includes sales of ink, paper stock, chemicals, developing paper,
sensitized paper, bookbindings, metal, wood, glue, brads, staples, binding
tape, and other tangible personal property where such property is purchased by
persons engaged in the graphic arts or related occupations and incorporated by
them into printed matter, pictures, or other tangible personal property which
they sell. However, except in the case of sales to totally exempt purchasers,
when sales for resale are made, sellers should, for their protection, take a
Certificate of Resale from the purchaser. Mere statements by sellers that
property was sold for resale will not be accepted by the Department without
corroborative evidence. See Section
130.1405 for a seller's
responsibility to obtain certificates of resale and the requirements for
certificates of resale.
2) It is
not material whether the ink, paper, developing paper and other similar items
are resold as ingredients of articles which have a commercial value or whether
the ink, paper stock, developing paper and other similar items are resold as
ingredients of articles which are produced on special order and which have no
commercial value.
f)
Liability Under the Service Occupation Tax
For information concerning the application of the Service
Occupation Tax to purchases, by graphic arts' servicemen, of tangible personal
property which they retransfer as an incident to rendering service, see the
Service Occupation Tax, 86 Ill. Adm. Code 140.