Tax Type
Retail Sales and Use Tax
Description
Information gathering for publications
Topic
Property Subject to Tax
Date Issued
05-17-2000
May 17, 2000
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This will reply to your letter in which you seek correction of the retail sales and use tax audit assessment issued to ***** (the "Taxpayer") for the period September 1995 through August 1998. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer is a Virginia nonprofit, tax-exempt corporation, in the business of producing various tax publications. The Taxpayer's products include daily, weekly, and monthly hard copy publications. The Taxpayer also distributes CD-ROM products issued monthly, quarterly and annually, and electronic products published daily. The Taxpayer contends that the industrial manufacturing and processing exemption applies to equipment and other items used in its operations.
DETERMINATION
Code of Virginia § 58.1-609.3(2) provides an exemption from the sales and use tax for machinery, tools, and other items used directly in the manufacture of tangible personal property for sale or resale. This statute was interpreted by the Virginia Supreme Court, in Golden Skillet Corporation v. Commonwealth, 214 Va. 276, 1999 S.E. 2d 511 (1973), which held that the cited statute was intended "to provide exemption for machinery and tools used in ... manufacturing ... products for sale or resale only in the industrial sense."
In addition, Code of Virginia § 58.1-602 provides, in pertinent part, that the term "industrial in nature" shall include all businesses classified in "codes 10 through 14 and 20 through 39 of the Standard Industrial Classification (SIC) Manual." Generally, businesses engaged in manufacturing are classified under SIC codes 20 through 39.
The Taxpayer provides a tax information service in the form of magazines, books, CDS, and also via an Internet web-site. While the Taxpayer is responsible for gathering all information it disseminates, it does not have a printing facility to print the hard copies of its products, nor does it duplicate the CDS it distributes. All printing and duplicating services are contracted out to third parties.
The Taxpayer contends that it falls under Major Group 27 of the SIC Manual, which categorizes Printing, Publishing, and Allied Industries as industrial manufacturers. A review of the Taxpayer's operation and the SIC Manual reveals that the Taxpayer's business is more accurately classified under SIC Major Group 73, Business Services, and Major Group 87, which includes Research. More specifically, sub-group 7375, Information Retrieval Services, and sub-group 8732, Commercial Economics, Sociological, and Educational Research appear to apply in this case. While the third party contractors which provide the Taxpayer with hardcopy printing and CD duplicating services may be classified as industrial manufacturers, the Taxpayer's predominant activities involve research and on-line information retrieval services. As such, the Taxpayer does not fall within those SIC codes prescribed for the purpose of being designated as industrial in nature and, therefore, does not qualify for the manufacturing exemption.
Based on all of the above, the assessment of tax is correct as issued. The Taxpayer's payment of the outstanding balance in the amount of $**** should be remitted within 30 days from the date of this letter. Payment may be sent to *****, Office of Tax Policy, P.O. Box 1880, Richmond, Virginia 23218-1880. If payment is not received within the allotted time, interest will accrue on the outstanding balance. If you have any questions regarding this matter, you may contact **** at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/25127K
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This will reply to your letter in which you seek correction of the retail sales and use tax audit assessment issued to ***** (the "Taxpayer") for the period September 1995 through August 1998. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer is a Virginia nonprofit, tax-exempt corporation, in the business of producing various tax publications. The Taxpayer's products include daily, weekly, and monthly hard copy publications. The Taxpayer also distributes CD-ROM products issued monthly, quarterly and annually, and electronic products published daily. The Taxpayer contends that the industrial manufacturing and processing exemption applies to equipment and other items used in its operations.
DETERMINATION
Code of Virginia § 58.1-609.3(2) provides an exemption from the sales and use tax for machinery, tools, and other items used directly in the manufacture of tangible personal property for sale or resale. This statute was interpreted by the Virginia Supreme Court, in Golden Skillet Corporation v. Commonwealth, 214 Va. 276, 1999 S.E. 2d 511 (1973), which held that the cited statute was intended "to provide exemption for machinery and tools used in ... manufacturing ... products for sale or resale only in the industrial sense."
In addition, Code of Virginia § 58.1-602 provides, in pertinent part, that the term "industrial in nature" shall include all businesses classified in "codes 10 through 14 and 20 through 39 of the Standard Industrial Classification (SIC) Manual." Generally, businesses engaged in manufacturing are classified under SIC codes 20 through 39.
The Taxpayer provides a tax information service in the form of magazines, books, CDS, and also via an Internet web-site. While the Taxpayer is responsible for gathering all information it disseminates, it does not have a printing facility to print the hard copies of its products, nor does it duplicate the CDS it distributes. All printing and duplicating services are contracted out to third parties.
The Taxpayer contends that it falls under Major Group 27 of the SIC Manual, which categorizes Printing, Publishing, and Allied Industries as industrial manufacturers. A review of the Taxpayer's operation and the SIC Manual reveals that the Taxpayer's business is more accurately classified under SIC Major Group 73, Business Services, and Major Group 87, which includes Research. More specifically, sub-group 7375, Information Retrieval Services, and sub-group 8732, Commercial Economics, Sociological, and Educational Research appear to apply in this case. While the third party contractors which provide the Taxpayer with hardcopy printing and CD duplicating services may be classified as industrial manufacturers, the Taxpayer's predominant activities involve research and on-line information retrieval services. As such, the Taxpayer does not fall within those SIC codes prescribed for the purpose of being designated as industrial in nature and, therefore, does not qualify for the manufacturing exemption.
Based on all of the above, the assessment of tax is correct as issued. The Taxpayer's payment of the outstanding balance in the amount of $**** should be remitted within 30 days from the date of this letter. Payment may be sent to *****, Office of Tax Policy, P.O. Box 1880, Richmond, Virginia 23218-1880. If payment is not received within the allotted time, interest will accrue on the outstanding balance. If you have any questions regarding this matter, you may contact **** at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/25127K
Rulings of the Tax Commissioner