A new Kentucky regulation, effective February 16, 2004, clarifies that charges by an advertising agency to provide its customer with advertising services is exempt from tax but the sale of tangible personal property is taxable. Examples of taxable tangible personal property include materials that become a component of the master advertisement, materials presented to the client as part of the advertising service and materials used in performance of the advertising service. Tangible personal property used as part of a contract with the federal or state government, government agencies or political subdivisions thereof, and religious, educational or charitable organizations are likewise subject to tax regardless of the exemption status of the contracting party. In the instance where charges for advertising services are not clearly separated on the customer’s invoice from the charges for tangible personal property, the entire sum is subject to tax. (Kentucky Regulation, Reg. 103 KAR 26:120, effective as noted above)