Iowa Admin. Code r. 701—285.10(423) — Envelopes for advertising

Some envelopes that contain advertising are exempt from tax. Envelopes that are not primarily used for advertising are taxable. The primary use of the envelopes should control whether they will be taxable or exempt. Example 1: XYZ mails coupons and advertisements to persons giving discounts on a certain item that is sold at retail. The envelope used to package these materials is exempt from tax since it is primarily used to contain advertising materials. Example 2: XYZ mails a monthly billing statement to its charge account customers. In addition to the billing statement, XYZ encloses an advertisement in the envelope. The envelope has a dual purpose: (1) the collection of accounts receivable and (2) the distribution of advertising. However, the envelope is not primarily used for advertising but for billing the customer, therefore, the exemption does not apply.