1. (a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

   1. (1) Motion picture--A series of images on tape, disc, film, or other object intended to be projected to produce the visual effect of motion. This definition covers feature length films of the type shown by a motion picture theater and by television stations and includes television commercials.
   2. (2) Motion picture master--The master tape, disc, film, or other object in which the motion picture is first fixed for later use in the manufacture of copies of the motion picture. Typically, the production of a motion picture master involves, among other things, a script, a cast, a set, a producer, director, and the ability to do retakes.
   3. (3) Producer--A person who has final creative control over production of a motion picture master.
   4. (4) Production/post-production company--A service company that provides facilities, personnel, equipment, and the technical knowledge and expertise to perform production or post-production work on a motion picture master. A production/post-production company does not have final creative control.
   5. (5) Release print--Processed film prints used for exhibition.
   6. (6) Video photographers--Any person who makes a tape or film record of property, such as inventory, personal property, or real estate, or who records an event not staged by the photographer, such as a wedding, deposition, or court case, on tape, disc, film, or other object.

2. (b) Tax responsibilities of production/post-production companies.

   1. (1) A production/post-production company or a person who provides post-production labor is considered to be providing a nontaxable service when performing production or post-production work on a motion picture master under the direction of a producer or another production/post-production company. Post-production work includes, but is not limited to, editing and synchronization of a motion picture master.
   2. (2) The production/post-production company must pay sales or use tax on the purchase, lease, or rental of all taxable items used or consumed in providing the nontaxable service.
   3. (3) Sales tax is due on the total amount charged for release prints and for making copies of the motion picture master except as provided in subsection (e) or (f)(2) of this section.
   4. (4) A production/post-production company must collect tax on the amount charged for equipment leased or rented to another without an operator. Providing maintenance, repair, or supervision of the equipment is not furnishing an operator. See §3.294 of this title (relating to Rental and Lease of Taxable Items).
   5. (5) For the purposes of this section, an advertising agency's sales tax responsibilities in the production of a motion picture master will be the same as those of a production/post-production company.

3. (c) Tax responsibilities of a producer.

   1. (1) Except as provided in subsection (e) or (f)(2) of this section, tax is due when the producer sells, leases, or rents a motion picture, master motion picture, or copies of a master motion picture.
   2. (2) A person who produces a motion picture master for the purpose of producing copies for sale, lease, or rental is considered a manufacturer and should refer to §3.300 of this title (relating to Manufacturing; Custom Manufacturing; Fabricating; Processing) and §3.286 of this title (relating to Seller's Responsibilities) for additional information. Persons who produce motion picture masters or copies for their own use and not for resale are not entitled to any manufacturing exemptions.
4. (d) Tax responsibilities of video photographers. The total amount charged by a video photographer for a motion picture record of an event or item is subject to tax. See §3.312 of this title (relating to Graphic Arts or Related Occupations; Miscellaneous Activities) for additional information. This subsection does not apply to the production of film or tape produced for use by a broadcast station licensed by the Federal Communications Commission which is intended for airing over the free, public airwaves, such as during a newscast.
5. (e) Television stations. A person who provides release prints or copies of motion pictures to licensed television stations is liable for tax on the cost of film material which is incorporated into a release print prior to processing and prior to physical delivery to a television station. In the absence of an itemized invoice which specifies the cost of the film material, such cost shall equal 50% of the total cost of the release print. Texas tax is due only one time on each copy when the copy first enters the state to be shown. The television station is not liable for tax on the amount the station pays for the copyright license to broadcast the film or for the tax assessed on the original cost of the film material.

6. (f) Motion picture theaters and motion picture distributors.

   1. (1) For sales and use tax purposes, theater operators and distributors are involved in a joint venture when motion picture film is shown in Texas theaters the admission to which is subject to tax.
   2. (2) Texas tax is due on the original cost of the film material which is incorporated into a release print prior to processing. In the absence of an itemized invoice which specifies the cost of the film material, such cost shall equal 50% of the total cost of the release print. The distributor is liable for paying the tax to the comptroller only one time when the release print first enters the state to be shown in a motion picture theater. The receipts payable to a distributor as a share of the total receipts from the exhibition are not taxable.
   3. (3) The motion picture operator is not responsible for sales tax on either the cost of the film or on the portion of the receipts paid to the distributor.

Source Note:The provisions of this §3.350 adopted to be effective November 15, 1988, 13 TexReg 5580.