Whether you have a business that does direct mail or you use direct mail for your business advertising, you need to be aware of direct mail sales tax laws. The problem is that sales tax laws for direct mail are extremely complex and vary greatly from state to state. However, if your business uses direct mail, you might be creating use tax liabilities you aren’t aware of and it’s your responsibility to pay them even if your printer doesn’t charge you for them. For instance, Minnesota exempts the costs of preparing direct mail for delivery, such as transportation, handling, affixing labels, or gluing pieces of direct mail together for mailing. The trick is, however, that these items must be separated out in their own line on the invoice.
The items used in the preparation of the direct mail, like rubber bands or shrink-wrap, that are non-returnable, are also exempt but must also be listed as a separate line item on the invoice. Address printing, if not listed separately and if it is only a small portion of the cost of the direct mail, is exempt. However, if address printing has its own line item on the invoice or is a large portion of the invoice, it’s taxable. And when taxable, it’s taxed at the location the mail is sent to in the end, not the location where it was printed. If the direct mailer doesn’t know where the mail is going, it’s the client’s obligation to pay the appropriate use tax on each item of mail. In all likelihood, your head is now spinning from all the complexities involved in direct mail in just one state. A savvy business owner might think these different rules might be used in different ways to get clients a better overall price so their business beats the other direct mail competition. But that means each customer has a completely different invoice where sales tax is computed in a different way each time.
That can get tricky quickly and leave your direct mail business open to many tax liabilities. If you’re a business owner using direct mail for marketing or billing, you’ll want to be aware of what your company needs to pay in use tax so you don’t miss it. The biggest problem, however, isn’t that direct mailing is really difficult to understand—it is that direct mailing lists often have lots of mistakes in addresses. If addresses are incorrect, the sales or use tax paid for those pieces of mail might be wrong. Even if you’ve figured out the laws in your state and abide by them, if you’re collecting the wrong sales tax or paying the wrong use tax, your business will have to pay if audited. Using our software to verify addresses for taxability purposes will ensure you’re using the correct sales tax rates.