Tax Type
Retail Sales and Use Tax
Description
Use tax on fabric swatch cards purchased for use in its brochures
Topic
Collection of Delinquent Tax
Property Subject to Tax
Date Issued
04-14-2000
April 14, 2000
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This is in response to your letter concerning the retail sales and use tax audit assessment issued to ***** (the Taxpayer). I apologize for the delay in responding to your letter. Copies of cited sources are enclosed.
FACTS
The Taxpayer manufactures upholstered furniture. As a result of an audit for the period January 1996 through December 1998, the Taxpayer was assessed use tax on fabric swatch cards purchased for use in its brochures. The Taxpayer contests the assessment, and maintains that such cards constitute printed materials eligible for the exemption set out under Code of Virginia § 58.1-609.6(4).
DETERMINATION
Code of Virginia § 58.1-609.6(4) provides an exemption from the retail sales and use tax for "[c]atalogs, letters, brochures, reports, and similar printed materials . . . when stored for twelve months or less in the Commonwealth and distributed for use without the Commonwealth." [Emphasis added].
In regard to fabric swatch cards, it is the established policy of the department that such cards do not constitute "similar printed materials" as to qualify for the above cited exemption. When buying fabric swatch cards, the charges from the supplier primarily represent charges for the fabrication of woven fabric rather than the production of printed materials. This is consistent with Public Document (P.D.) 86-34 (2/26/86).
Even if the Taxpayer furnished a supplier with swatches to produce fabric swatch cards or placed the swatches on printed cards purchased from a supplier, the supplier's charges are taxable based on 100% of the sales price. This is consistent with P. D. 90-15 (1/11/90) and P. D. 94-239 (8/10/94).
Accordingly, l find no basis to extend the exemption for "similar printed materials" found in Code of Virginia § 58.1-609.6(4) to the Taxpayer's purchases of fabric swatch cards.
The Taxpayer indicates that it also buys digitally formatted display cards in which no fabric is used to display its products in brochures. Such digital display cards constitute "similar printed materials" and may qualify for the above cited exemption if used outside Virginia after storage here for less than one year.
Accordingly, the audit may be revised if the Taxpayer is able to establish that digital display cards were assessed in the department's audit, and that such cards were distributed for use outside Virginia within one year of purchase. If this is the case, please contact the auditor, **** within sixty days of the date of this letter to arrange for a revision of the audit. **** may be reached at ****.
If you have any questions about this response, please contact **** of my Tax Policy staff at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/22501R
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This is in response to your letter concerning the retail sales and use tax audit assessment issued to ***** (the Taxpayer). I apologize for the delay in responding to your letter. Copies of cited sources are enclosed.
FACTS
The Taxpayer manufactures upholstered furniture. As a result of an audit for the period January 1996 through December 1998, the Taxpayer was assessed use tax on fabric swatch cards purchased for use in its brochures. The Taxpayer contests the assessment, and maintains that such cards constitute printed materials eligible for the exemption set out under Code of Virginia § 58.1-609.6(4).
DETERMINATION
Code of Virginia § 58.1-609.6(4) provides an exemption from the retail sales and use tax for "[c]atalogs, letters, brochures, reports, and similar printed materials . . . when stored for twelve months or less in the Commonwealth and distributed for use without the Commonwealth." [Emphasis added].
In regard to fabric swatch cards, it is the established policy of the department that such cards do not constitute "similar printed materials" as to qualify for the above cited exemption. When buying fabric swatch cards, the charges from the supplier primarily represent charges for the fabrication of woven fabric rather than the production of printed materials. This is consistent with Public Document (P.D.) 86-34 (2/26/86).
Even if the Taxpayer furnished a supplier with swatches to produce fabric swatch cards or placed the swatches on printed cards purchased from a supplier, the supplier's charges are taxable based on 100% of the sales price. This is consistent with P. D. 90-15 (1/11/90) and P. D. 94-239 (8/10/94).
Accordingly, l find no basis to extend the exemption for "similar printed materials" found in Code of Virginia § 58.1-609.6(4) to the Taxpayer's purchases of fabric swatch cards.
The Taxpayer indicates that it also buys digitally formatted display cards in which no fabric is used to display its products in brochures. Such digital display cards constitute "similar printed materials" and may qualify for the above cited exemption if used outside Virginia after storage here for less than one year.
Accordingly, the audit may be revised if the Taxpayer is able to establish that digital display cards were assessed in the department's audit, and that such cards were distributed for use outside Virginia within one year of purchase. If this is the case, please contact the auditor, **** within sixty days of the date of this letter to arrange for a revision of the audit. **** may be reached at ****.
If you have any questions about this response, please contact **** of my Tax Policy staff at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/22501R
Rulings of the Tax Commissioner