Texas Comptroller of Public Accounts    STAR System


200207261L



July 17, 2002


**************
**************
**************
**************

Dear **************:

You operate a video and multimedia business providing business-to-business 
video presentations, video of legal depositions and a variety of related 
services and products.  I will attempt to answer your questions by providing 
principals that you can apply to these as well as other situations that may 
apply.

Sales of tangible property including property such as audio or video recordings 
transferred on a format of any kind (CD, DVD, download, etc.) are subject to 
Texas state and local tax.  However, the producing of a video or multimedia 
master, a copy that will be sold, offered for sale, licensed, distributed, 
broadcast, or exhibited is not taxable when the purchaser issues an exemption 
certificate to the production company claiming the master production exemption. 
Salesmen exhibiting the master production to potential customers meets this 
criteria as does exhibiting the production on a Web site. The sale of 
duplicates of the audio or video master are taxable when sold to an individual 
in Texas. The sale of duplicates that you ship to locations outside Texas are 
exempt from Texas tax.   

Generally, a video photographer is required to collect tax on the total charge 
for video taping services (e.g., weddings, graduations, etc.). However, Texas 
Tax Code Section 151.353 allows a participant in a civil or criminal suit to 
claim an exemption on a video tape of a deposition prepared for use in the 
suit. Therefore, you will not collect sales tax from the attorneys for the 
videotaping of the deposition regardless of who provides the tapes and 
equipment. Instead, you may accept a properly completed exemption certificate 
from the attorney stating that the video deposition is used by a participant in 
a civil or criminal suit.

With the above principles in mind, each of the discrete labor components you 
listed are restated with comments as if each item were performed on a 
stand-alone basis for a customer.

1.  Writing narration scripts for video, and/or multimedia, presentations.

Response 1:  Not taxable

2.  Creating graphics on the computer for video, and/or multimedia, 
presentations.

Response 2:  Graphic arts is considered to be the production of tangible 
personal property and subject to tax unless the customer issues a resale or 
exemption certificate in lieu of tax.

3.  Filming video with my camera for video, and/or multimedia, presentations.

Response 3:  Filming of events such as weddings and birthdays is subject to 
sales tax.  Filming video that will become a component of a motion picture 
master is not taxable.

4.  Filming video for legal depositions.

Response 4:  Exempt under Tax Code Section 151.353.

5.  Editing video for video, and/or multimedia, presentations.

Response 5:  Editing video for individuals that provide the video material to 
you is taxable unless the customer issues you a resale or exemption certificate 
in lieu of tax.

6.  Recording audio for video, and/or multimedia, presentations.

Response 6:  As previously stated, a motion picture or video or audio 
recording, a copy of which is sold or offered for ultimate sale, licensed, 
distributed, broadcast, or otherwise exhibited is exempt from tax.  Video 
master, multimedia, presentations and computer animation are subject to Texas 
state and local tax if the master is delivered to a customer in Texas and the 
exemption is not claimed.

7.  Editing audio for video, and/or multimedia, presentations.

Response 7:  Editing audio for video, and/or multimedia, presentations is 
taxable unless an exemption is claimed.

8.  Programming computer based interactive multimedia presentations.

Response 8:  Programmers creating computer programs from scratch for customers 
that are given all and exclusive rights to the programs are acting as employees 
of those customers rather than sellers of software. As such, their work product 
is not subject to sales tax.  However, if you sell, license or lease software, 
you must collect tax on the transaction.

9.  Transferring presentation data from editing system to delivery media (i.e.: 
 CD-ROM; Video Tape; and DVD)

Response 9:  Transferring presentation data from one medium to another is 
taxable as the provision of data processing service unless an exemption is 
claimed.  Twenty percent of the value of data processing service is exempt from 
tax. 

10.  Designing labels for CD-ROM, Video Tape, and DVD.

Response 10:  Designing labels for various medium is taxed as the creation of 
graphic arts unless an exemption is claimed.

11.  Printing labels for CD-ROM, Video Tape, and DVD.

Response 11:  Printing labels for various medium is taxed as the creation of 
graphic arts unless an exemption is claimed.

12.  Applying labels to CD-ROM, Video Tape, and DVD.

Response 12:  Applying labels for various medium is taxed as the creation of 
graphic arts unless an exemption is claimed.

I should also point out that each of the tangible deliverables you mentioned 
are subject to sales tax when you deliver them to a customer in Texas and no 
exemption is claimed.

The state sales tax rate is 6.25 percent with up to an additional 2 percent of 
local sales and use tax that may also be due.  I have attached our Local Tax 
Guidelines bulletin for your reference.  ************** does not impose a city 
sales tax, but has territory in both Franklin and Harris County.  Franklin 
County imposes a .5 percent county tax and the area of ************** in Harris 
County is in the Houston Mass Transit Authority (MTA) that imposes a 1 percent 
MTA tax.  You did not say if you were in Franklin or Harris County.  Please 
read the local tax bulletin and feel free to call me personally with questions 
that you may have.

To apply for a sales tax permit, go online to 
http://www.window.state.tx.us/taxinfo/taxforms/01-forms.html and download the 
Texas Sole Owner Application for Sales and Use Tax Permit (form AP-157).  The 
frequency of returns that you will file is determined by the volume of sales 
tax that you expect to remit.  Filing periods may be monthly, quarterly or 
yearly with returns due to be postmarked by the 20th of the month following the 
end of the reporting periods.  Reports and payments are sent to this Agency.

I am attaching several rules that should be helpful.  Also attached are resale 
and exemption certificates for your possible use.

The entire text of the Tax Code, a complete set of rules, and a wealth of other 
information are available at 
http://www.window.state.tx.us/taxinfo/salestax.html through our website.

This opinion is rendered based on the information you provided.  Other facts, 
though similar, may yield different results.

You may reach me toll-free at 1-800-531-5441, ext. 3-4680.  The direct line is 
(512) 463-4680.  You may also write to Tax Policy, Comptroller of Public 
Accounts.

Sincerely,


Al Van Allen
Tax Policy Division  




ACCESSION NUMBER: 200207261L   
SUPERSEDED: N 
DOCUMENT TYPE: L 
DATE: 07/17/2002 
TAX TYPE: SALES