Pre-stamped stuffed envelopes subject to use tax in North Carolina.

An independent franchisee purchased envelopes containing advertising coupons and fliers, which were assembled in another state, from its franchisor. The franchisee distributed the envelopes to customers it had solicited in North Carolina. Using the true object test, the Department determined that what the franchisee was purchasing was printed matter, which is considered tangible personal property, and not advertising services, as the franchisee had asserted. Because the franchisee owned and used the envelopes in North Carolina, the use tax was assessed. (Secretary of Revenue Decision No. 2003-442, March 12, 2004)

Posted on July 28, 2004