Tennessee – Advertising Materials Distributed Outside State Not Taxable

1/31/2012

SALT Report 2102 – The Tennessee Department of Revenue issued a ruling regarding the taxability of printed advertising material shipped to, and temporarily stored at, a distribution center in Tennessee.  The printed materials include signs, brochures, pamphlets, and catalogues that the Taxpayer provides to its representatives who are located throughout the United States.

The Taxpayer requested guidance regarding Tennessee Code ann. § 67-6-313(a), which provides an exemption for imported advertising materials that are subsequently shipped to retail locations, both in and out of Tennessee.

In its decision the Department notes that, the advertising materials that are printed outside Tennessee and shipped to the distribution center in Tennessee, for subsequent delivery throughout the United States, are generally not subject to sales and use tax.  However, any advertising materials that are distributed in Tennessee are subject to use tax under Tennessee Code ann. § 67-6-203(b)(1).  The code states that tax is imposed on “distributors” based “on the value of catalogues, advertising fliers, or other advertising publications distributed to residents of Tennessee; provided that this tax is not duplicative of a sales or use tax otherwise collected on such publications.”

Based on the above, the Department determined that the Taxpayer’s advertising materials that are printed outside Tennessee and stored at the Taxpayer’s distribution facility in Tennessee are not subject to use tax if the materials are later distributed outside Tennessee.

However, if the state where the advertising materials are originally printed imposes use tax, the amount of tax paid to that state may be credited against any Tennessee use tax due on the advertising materials distributed in Tennessee.

For Further Information

Tennessee Department of Revenue – Revenue Ruling #12-31