The Notice of State Taxation Administration of The People's Republic of China of the Ministry of Finance on Launching a Pilot Project of Changing the Business Tax of Transportation Industry and Some Modern Service Industries to VAT in Shanghai (Caishui [201]1/No.) stipulates in Item 3 of Article 1 of Annex 2 that the pilot taxpayers provide taxable services, and the business tax shall be levied according to the relevant national business tax policies. It is allowed to deduct the total price and extra-price expenses paid to non-pilot taxpayers (referring to taxpayers in pilot areas and taxpayers in non-pilot areas who do not pay value-added tax according to the implementation measures of pilot areas) as sales.
Regarding the differential taxation of the advertising industry, Item 18 of Article 3 of the Notice of the Ministry of Finance of State Taxation Administration of The People's Republic of China on Several Policy Issues concerning Business Tax (Caishui [2003] 16) stipulates that the turnover of those engaged in advertising agency business shall be the balance of their total income minus the advertising fees paid to other advertising companies or publishers (including media and carriers).
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