Utah Clarifies Taxability of Public Relations, Media, And Web Design Services

A private letter ruling was issued by the Utah State Tax Commission in response to a taxpayer’s questions concerning sales and use tax treatment of various charges associated with public relations, advertising and marketing.

Public relations service retainers, including coordinating media events and media interviews, are exempt from tax because Utah does not impose sales or use tax on consulting services for planning, management, execution and reporting of public relations activities. Advertising and marketing labor retainers are similarly exempt. However, tax is due on purchases of materials and supplies used in providing these services.

Labor charges for logo design and production, advertising materials, packaging, and label design are not taxable because graphic design services are not subject to Utah sales and use tax provided the services are the true object of the transaction. This remains true even if the design is incorporated into a tangible medium.

Charges for website design, including time to conceptualize, design, program or maintain a website, are not subject to Utah sales and use tax provided the object of the transaction is the company’s expertise rather than the purchase of the website with the design services only a secondary consideration. However, should the design of a website entail only the bundling of pre-existing programs into a unique website for a specific client, the Commission would probably consider the transaction to be a taxable purchase of canned computer software. (Private Letter Ruling, Opinion No. 09-002, Utah State Tax Commission, August 17, 2009 (released April 2010))

Posted on May 4, 2010