This publication applies only to sales of printed materials that meet the definition of direct mail and to fulfillment services.
Direct Mail
Direct mail is printed material that meets the following three criteria:
- It is delivered or distributed by U.S. Mail or other delivery service
- It is sent to a mass audience or to addresses on a mailing list provided by the purchaser or at the direction of the purchaser
- The cost of the items is not billed directly to recipients
Direct mail includes items supplied by the purchaser to include in the mailing, such as shampoo samples to include with shampoo coupons.
Direct mail does not include multiple items of printed material delivered to a single address.
Printing
Printing charges are taxable. This includes all charges to prepare a piece for printing, such as design or layout functions, and any steps to complete the printed piece (cutting, folding, binding).
You may purchase materials used or consumed in the production of printed materials, sold ultimately at retail exempt, from sales tax. For example, paper and ink. Give your vendor a completed Form ST3, Certificate of Exemption and select the Industrial production/manufacturing exemption.
For more information, see Printing Industry.
Bundled Transactions
A bundled transaction is when taxable items and nontaxable items are combined and sold for a single price. The sale is taxable unless the price of the taxable item or service is minimal.
To be minimal, the seller’s purchase price or sales price for the taxable products must be 10% or less of their total purchase or sales price for the bundled products.
Printing Bundled Transaction Example
Sometimes only an address or a bar code is printed for a direct mail or fulfillment service. If the charge for this printing is separately stated, it is taxable. If the printing charge is not separately stated and the printing cost is minimal compared to the total cost of the mailing service, it is a nontaxable charge.
Direct Mail Delivery Charges
Separately stated charges to deliver or distribute direct mail are not taxable.
Nontaxable direct mail delivery charge examples:
- Crating
- Handling
- Packing
- Postage
- Shipping
- Transportation
Mailing Services
Separately stated fees for services to prepare direct mail for delivery or distribution are not taxable. Sometimes referred to as “mail entry services.”
Nontaxable mailing services examples:
- Affixing postage or labels
- Boxing, putting in shipping boxes
- Bursting, separate at perforations, separating checks to mail individually
- Collating
- Folding for mailing or distribution purposes
- Gluing to hold the piece together during mailing
- Inserting
- Metering, applying postage
- Shrink wrapping
- Tabbing, affixing a tab to hold the piece together during mailing
Nonreturnable Packaging and Mailing Materials
Nonreturnable materials used to package and mail printed materials that will be sold at retail may be purchased exempt. Give your supplier a completed Form ST3, Certificate of Exemption and select the Industrial production/manufacturing exemption.
Nontaxable packaging and mailing material examples:
- Banding
- Cartons
- Chipboard and slip sheets
- Envelopes
- Glue
- Packaging
- Pallet tops
- Pallets and skids
- Poly bags
- Shrink wrap
- Tabs
- Tape
Note: If you are performing a service and there is no retail sale of printed materials, these exemptions do not apply.
Sourcing Direct Mail
Sales or use tax is due based on the locations where the direct mail is delivered.
If the purchaser provides the printer with delivery information for the direct mail, the printer must charge tax according to the delivery information provided. If the printer is not required to collect sales tax in states where the items are shipped, the purchaser is responsible to pay any applicable use tax to those states. The purchaser must keep records of the delivery information.
The printer may not have enough information to properly source the direct mail to the correct jurisdictions, even when the printer has a mailing list. For example, when direct mail is sent to all addresses within a specific neighborhood, city, or county but the printer does not know the exact addresses.
If the purchaser does not provide the printer with delivery information for the direct mail, the purchaser may provide the printer with a completed Form ST3, Certificate of Exemption. The purchaser may select either the Direct mail exemption or the Direct pay authorization, if they are authorized. The printer does not charge sales tax, and the purchaser is responsible to pay any applicable use tax to the taxing jurisdictions where the direct mail is delivered.
If the purchaser does not provide the printer with either of the above items, the printer must charge the sales tax rate imposed in the location where the mail was shipped. If the mail is delivered to locations within a different taxing jurisdiction, the purchaser is liable for paying any applicable local use taxes due in those locations.
