Current through Register Vol. 24-06, March 15, 2024
(1)
Introduction. This rule
discusses the business and occupation (B&O) tax and retail sales and use
tax reporting responsibilities of persons who engage in duplicating activities
or who provide mailing bureau services in Washington. Persons engaged in
printing activities should refer to WAC
458-20-144 (Printing
industry).
(2)
Duplicating
activities. Duplicating is the copying of typed, written, drawn,
photographed, previously duplicated, or printed materials using a photographic
process such as photocopying, color copying, or blueprinting.
(a)
Sales of duplicated
products. Income from the sale of photostats, photocopies, blueprint
copies and other duplicated tangible personal property to consumers is subject
to the retailing B&O tax. The measure of tax is the gross proceeds of sale.
The seller is also responsible for collecting and remitting retail sales tax on
the selling price when making sales to consumers, unless a specific exemption
applies. The wholesaling B&O tax applies to the gross proceeds of sale when
the buyer purchases the duplicated property for resale without intervening use.
The seller must obtain a resale certificate from the buyer to document the
wholesale nature of any sale as provided in WAC
458-20-102 (Resale certificates).
If the seller is also the manufacturer of the duplicated
products, the seller may be eligible for a multiple activities tax credit.
Refer to WAC
458-20-19301 (Multiple activities
tax credits) for more information about the credit.
(b)
Duplicating as a manufacturing
activity. A person duplicating tangible personal property for sale or
commercial or industrial use (the use of manufactured property as a consumer)
is subject to the manufacturing B&O tax classification. For further
information about manufacturing activities, refer to WAC
458-20-112 (Value of products),
WAC 458-20-134 (Commercial or
industrial use), and WAC
458-20-136 (Manufacturing,
processing for hire, fabricating).
(c)
Self-service copying. Some
persons provide consumers with access to duplicating equipment to make their
own copies (frequently referred to "self-service copying"). These customers are
generally charged on a per page basis. The gross proceeds of sales made to
consumers for self-service copying is subject to the retailing B&O tax. The
seller is also responsible for collecting retail sales tax, unless a specific
exemption applies. In such cases, the person providing access to duplicating
equipment is not engaged in a manufacturing activity and charges for
self-service copying are not subject to the manufacturing B&O
tax.
(d)
Potential litter tax
liability.Chapter 82.19 RCW imposes a litter tax on manufacturers
(including duplicators), wholesalers, and retailers of certain products. These
products include, but are not limited to, newspapers, magazines, and household
paper and paper products. Thus, persons who duplicate tangible personal
property for sale or who provide facilities for self-service copying may incur
a litter tax liability. The measure of the litter tax is the gross proceeds of
sale. For further information about the litter tax, refer to chapter 82.19 RCW
and WAC 458-20-243 (Litter
tax).
(e)
Purchases for
resale. The purchase of tangible personal property for resale as
tangible personal property or as a component or ingredient of duplicated
property is a purchase at wholesale. Examples of items that may be purchased at
wholesale include paper, ink, toner, and staples. Refer to WAC
458-20-113 (Ingredients or
components, chemicals used in processing new articles for sale). Wholesale
purchases are not subject to retail sales tax when the buyer provides a resale
certificate to the seller as provided by WAC
458-20-102 (Resale
certificates).
(f)
Purchases
subject to retail sales or use tax. A person who engages in duplicating
activities and acquires tangible personal property for use as a consumer must
pay retail sale tax (commonly referred to as "deferred sales tax") or use tax
directly to the department when the seller fails to collect retail sales tax.
Examples of purchases by a person engaged in duplicating activities that are
subject to retail sales tax or use tax include photocopiers, cutting boards,
computers, cash registers, and office furniture. For further information about
the use tax, refer to WAC
458-20-178 (Use tax).
Persons who engage in duplicating products for sale should
refer to WAC
458-20-13601 (Manufacturers and
processors for hire -- Sales and use tax exemption for machinery and equipment)
for information about the sales and use tax exemptions for certain machinery
and equipment used directly in a manufacturing operation.
(g)
Example. Copy Company
provides a public area with photocopying equipment and materials (paper, toner,
and staples) to allow customers to make their own copies. Copy Company has a
separate area where Copy Company employees make copies for customers. The
income attributable to copies made both by the customers and by Copy Company
employees is subject to the retailing B&O and retail sales taxes. The value
of the copies made by Copy Company employees is also subject to the
manufacturing B&O tax, and Copy Company may claim a multiple activities tax
credit as described above in subsection (2)(a). Litter tax may be due as
explained above in subsection (2)(d).
Copy Company may purchase the paper, toner, and staples that
are used or provided in both areas at wholesale, if the seller receives a
resale certificate. Retail sales or use tax applies to the purchase of
photocopying equipment in both areas. The purchase and/or use of the equipment
where Copy Company employees make copies may qualify for the machinery and
equipment exemption described in WAC
458-20-13601.
(3)
Mailing bureau
services. Mailing bureaus, also referred to as mail houses, prepare for
distribution mail pieces such as bulletins, form letters, advertising material,
political publications, and flyers as directed by their customers. The customer
may provide the mail pieces to be prepared for distribution or the mailing
bureau itself may sell the material to the customer. Mailing bureaus that
duplicate the material being prepared should also refer to subsection (2),
above. Mailing bureaus that print the material being prepared should also refer
to WAC 458-20-144.
(a)
Mailing bureau activities.
Activities conducted by mailing bureaus include, but are not limited to,
picking up, addressing, labeling, binding, folding, enclosing, sealing,
tabbing, and mailing the mail pieces. The mailing bureau generally charges the
customer on a per-piece basis for each separate service provided plus the
actual cost of any postage.
Charges for labor and services rendered in respect to altering,
imprinting, or improving tangible personal property of or for consumers are
retail sales.
RCW
82.04.050(2)(a). Thus, the
retailing B&O tax applies to income received from consumers for services
that include addressing, labeling, binding, folding, enclosing, sealing, and/or
tabbing. Mailing bureau businesses are also responsible for collecting and
remitting retail sales tax when making sales to consumers, unless a specific
exemption applies.
(b)
Measure of tax. The measure of the B&O and retail sales taxes
is the gross proceeds of sale and selling price, respectively. These terms
include all consideration paid by the buyer, however identified, without any
deduction for costs of doing business, such as material, labor, and delivery
costs. RCW 82.04.070 and
82.08.010.
(i)
Postage. Charges for postage
or other delivery costs are included in the measure of tax for both B&O tax
and retail sales tax if the costs are part of the consideration paid by the
customer. It is immaterial if the amounts charged for postage are stated or
shown separately on the sales invoice or reflect actual mailing costs to the
mailing bureau. Amounts charged for postage and other delivery costs are not
included in the measure of tax only if the amounts are not part of the
consideration paid by the customer.
(A)
When is postage part of the consideration paid? Charges for
postage costs are considered part of the consideration paid if the permit to
use precancelled stamps, a postage meter, or an imprint account for bulk
mailings is in the name of the mailing bureau. The mailing bureau is liable to
the post office for payment and the customer's payment of such amounts
represents a payment on the sale of tangible personal property or the services
provided. For further information, refer to WAC
458-20-111 (Advances and
reimbursements).
(B)
When is
postage not part of the consideration paid? Charges for postage are not
considered part of the consideration paid if the permit to use precancelled
stamps or a permit imprint account for bulk mailings is in the customer's name.
The mailing bureau in these cases has no primary or secondary liability for
payment of the postage costs. (Refer to WAC
458-20-111 for information about
advances and reimbursements.)
(ii)
Examples. The following
examples identify a number of facts and then state a conclusion. These examples
should be used only as a general guide. The tax results of any situation must
be determined after a review of all facts and circumstances. For purposes of
the following examples, sales invoices to the customer separately identify
charges for postage.
(A)
Example
1. Mailing Bureau receives mail pieces from Department Store to prepare
and mail. Mailing Bureau advises Department Store of the estimated amount of
postage. Department Store deposits an amount equal to the estimated cost of
postage in its own permit imprint account. The estimated postage is not part of
the total consideration paid because the Department Store is personally liable
to the post office for postage. The total charge, excluding postage, is the
consideration paid by Department Store and subject to tax.
(B)
Example 2. Assume facts as
described above in Example 1. The post office determines that the actual cost
of postage exceeds the estimated amount deposited by Department Store in its
permit imprint account. Post office transfers the additional amount for postage
from Mailing Bureau's account. Mailing Bureau invoices Department Store for the
additional amount. The additional amount for postage is not part of the
consideration paid and is not included in the measure of tax because Mailing
Bureau's liability for payment of the additional postage is limited to that of
an agent.
(C)
Example
3. Mailing Bureau receives from Political Candidate B mail pieces to
prepare and mail. Mailing Bureau uses its own postage meter to apply metered
postage. Postage is a part of the consideration paid by Candidate B and is
included in the measure of tax.
(D)
Example 4. Mailing Bureau receives prestamped mail pieces from
Medical Clinic to prepare and mail. The mail pieces qualify for the lower bulk
mail rates after Mailing Bureau prepares the mail pieces. The post office
refunds the difference between the single piece rate and the bulk mail rate to
Mailing Bureau. Mailing Bureau retains the amount due for services rendered and
in turn remits the balance of the refunded postage to Medical Clinic. Postage
is not a part of the consideration paid and is not included in the measure of
tax.
(E)
Example 5.
Mailing Bureau prints, prepares, and mails mail pieces for Non-Profit
Organization's fund-raising drive. Mailing Bureau applies metered postage using
its own postage meter. The charge for postage is a part of the consideration
paid and included in the measure of tax.
(F)
Example 6. Mailing Bureau
duplicates, prepares, and mails advertising for Restaurant. Mailing Bureau
applies precancelled stamps that it purchases from the post office. The charge
for postage is a part of the consideration paid and included in the measure of
tax.
(G)
Example 7.
Mailing Bureau picks up mail pieces from Washington City to prepare and mail.
Mailing Bureau applies metered postage using its own postage meter. The charge
for postage is a part of the consideration paid by Washington City and included
in the measure of tax.
(H)
Example 8. Mailing Bureau prepares and mails advertising for
Insurance Company. To apply postage, Mailing Bureau uses a postage meter leased
by Insurance Company from a third party vendor. Insurance Company is liable to
the third party vendor for payment of postage. The consideration does not
include charges for postage.
(I)
Example 9. Assume same facts as described in Example 8 above. The
postage meter account contains insufficient funds required for mailing pieces.
Mailing Bureau advances sufficient funds to Insurance Company's metering
account. Mailing Bureau invoices Insurance Company for the additional amount.
The consideration does not include postage because Mailing Bureau's liability
for payment is limited to that of an agent.
(c)
Retail sales tax exemptions.
Certain sales tax exemptions may apply to the sale of tangible personal
property or labor and services rendered to tangible personal property.
(i)
Interstate sales of tangible
personal property. The sale of tangible personal property is not subject
to retail sales tax when the seller agrees to and does deliver the property
outside the state. Refer to WAC
458-20-193 (Inbound and outbound
interstate sales of tangible personal property) for further information about
interstate sales.
(ii)
Labor
and services rendered in respect to tangible personal property of or for a
nonresident.RCW 82.08.0265 provides a retail
sales tax exemption for charges made for labor and services rendered in respect
to any installing, repairing, cleaning, altering, or improving tangible
personal property of or for a nonresident when the seller agrees to and does
deliver the property to the purchaser at a point outside this state or delivers
the property to a common or bona fide private carrier consigned to the
purchaser at a point outside this state. For further information about this
exemption, refer to WAC
458-20-173 (Installing, cleaning,
repairing or otherwise altering or improving personal property of
consumers).
(d)
Purchases for resale. The purchase of tangible personal property
for resale as tangible personal property or to become a component or ingredient
of property upon which mailing bureau services will be performed is a purchase
at wholesale. Examples of items that may be purchased at wholesale include
paper, printing ink, envelopes, and staples. Wholesale purchases are not
subject to retail sales tax when the buyer provides a resale certificate to the
seller as provided by WAC
458-20-102 (Resale certificates).
Refer to WAC
458-20-113 (Ingredients or
components, chemicals used in processing new articles for sale) for further
information regarding ingredients and components.
(e)
Purchases subject to retail sales
or use tax. A mailing bureau business that purchases, leases, or
otherwise acquires tangible personal property for use as a consumer must pay
retail sale tax (commonly referred to as "deferred sales tax") or use tax
directly to the department when the seller fails to collect the retail sales
tax. Examples of such property include photocopiers, cutting boards, computers,
office furniture, and equipment to address, label, fold, seal, insert, meter,
stamp, or sort. For further information about the use tax, refer to WAC
458-20-178 (Use tax).
(f)
Purchases of mailing lists.
Persons acquiring mailing lists are purchasing an information service
regardless of the medium used to provide or transfer the information. Thus, the
purchase of a mailing list by a mailing bureau business is not subject to
either retail sales or use tax.
Statutory Authority:
RCW
82.32.300 and
82.01.060(2).
05-03-053, § 458-20-141, filed 1/11/05, effective 7/1/05. Statutory
Authority:
RCW
82.32.300. 83-07-034 (Order ET 83-17), §
458-20-141, filed 3/15/83; Order ET 70-3, § 458-20-141 (Rule 141), filed
5/29/70, effective 7/1/70.