Sales Tax Slice: Much-Anticipated Super Bowl Ads Have Little-Known Sales Tax Implications


 

Sbowl

In September of 2016, the NFL kicked off its season creating a plethora of taxing opportunities in states where alcohol, game-day goodies, football jerseys and Tom Brady bobble heads (apparently very popular) are taxable. The season is now winding down with Super Bowl LI on the horizon, but before we watch the New England Patriots face off against the Atlanta Falcons for one last hurrah, there is yet another opportunity to talk tax—in this case with respect to the Super Bowl commercials that we all know and love!

According to Fortune, 30 seconds of airtime during last year’s Super Bowl cost a cool $5 million. This year, besides paying millions for airtime, companies advertising during the big game will likely splurge to come up with commercials that make us laugh, cry and buy (of course). In some states, making and broadcasting these ads might also require sales tax payments.

In Texas, the home of this year’s Super Bowl, advertising and promotional placement fees are not subject to sales tax, unless the fees are related to employee-fabricated property or the sale of other taxable items. Similarly, design services are also tax-exempt unless the services relate to the sale of tangible personal property. This means that in Texas, purchasing creative concept development services to make ads that sell tangible personal property are taxable. Remember last year’s Skittles commercial, where Aerosmith front man Steven Tyler was serenaded by a candy coated portrait of himself? The fees related to the production of that masterpiece might be taxable in a state like Texas. 

Georgia, host for the 2019 Super Bowl, also exempts services made by advertising agencies for preparing and placing advertisements in media. However, taxes must be collected on tangible personal property sold in connection with the service. The same rules apply to advertising and promotional design services.

Florida, which has been selected to host the game in 2020, provides a similar broad exemption for advertising services. Like Georgia, the state also requires service providers to collect tax on tangible personal property sold or used to fulfill advertising services. Additionally, Florida explicitly provides that promotional merchandise exchanged for radio or TV advertising is subject to tax.

While companies looking to advertise during the big game may be able to avoid sales tax on advertisement and placement services, sales tax will probably find its way back into the picture as tangible personal property is sold, transferred and fabricated in order to make expensive marketing ideas come to life. That being said, sales tax is likely a very minute concern when the going rate for less than a minute of airtime is millions of dollars.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: What other sales tax issues are implicated by Super Bowl ads or broadcast advertising in general?

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