Tax Type
Retail Sales and Use Tax
Description
Audiovisual works and printed materials exemptions
Topic
Exemptions
Property Subject to Tax
Date Issued
07-07-2000
July 7, 2000
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This will reply to your letter in which you seek the correction of a retail sales and use tax assessment issued to ***** (the "Taxpayer") for the period of December 1992 through November 1998. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer provides a service in which it distributes video and audio tapes of public service announcements for broadcast by media outlets such as television and radio stations. The Taxpayer solicits feedback from the media outlets concerning the amount of broadcast time for each public service announcement and the frequency of the broadcasts. The Taxpayer compiles this information and periodically reports this information to clients. The distribution and evaluation services are typically provided to government agencies and nonprofit organizations.
The Taxpayer maintains that the department's assessment of use tax on purchases of printed materials used in the provision of its services is erroneous. The printed materials include letterhead containing the Taxpayer's printed logo, business reply cards, package labels, mailers, and postcards. These materials are included in the video and audio packages that are distributed to the media outlets and are used to mail the packages and solicit feedback from the media outlets. The Taxpayer states that the exemption for audiovisual works and the exemption for printed materials apply to purchases of the printed materials.
DETERMINATION
Audiovisual Works Exemption
Code of Virginia § 58.1-609.6(6)(a)(iii) provides an exemption from sales and use tax for "the transfer or use of tangible personal property, including, but not limited to, scripts, musical scores, storyboards, artwork, film, tapes and other media, incident to the performance of such services or fabrication . . . ."
The exemption referenced above is for tangible personal property that is used to produce or create audiovisual works such as the television and radio commercials the Taxpayer distributes. However, the Taxpayer does not produce such audiovisual works. This exemption applies to property used in the actual production of the commercials and public service announcements - an activity that has been completed when the Taxpayer receives the copy that is used to make dubs for distribution. Likewise, the printed materials are used in connection with the Taxpayer's service of distributing and evaluating broadcasts of the public service messages. The printed materials are not used directly in the production or fabrication of audiovisual works. For this reason, the audiovisual works exemption does not apply to the Taxpayer's purchases of the printed materials.
I note that the auditor's comments indicate that blank tapes were treated as exempt items in the Taxpayer's audit. Based on the above, the Taxpayer does not enjoy an exemption on purchases of blank tapes. On a prospective basis, the Taxpayer must pay the applicable sales or use tax on purchases of blank tapes.
Printed Materials Exemption
Code of Virginia § 58.1-609.6(4) provides an exemption from sales and use tax for "[c]atalogs, letters, brochures, reports, and similar printed materials, except administrative supplies, the envelopes, containers and labels used for packaging and mailing same ... when stored for twelve months or less in the Commonwealth and distributed for use without the Commonwealth." (Emphasis added.) The term "similar printed materials" is defined in Title 23 of the Virginia Administrative Code 10-210-260 (copy enclosed) as "printed materials used for promotional purposes, except administrative supplies." Based on the Taxpayer's use of the printed materials, these items are administrative supplies for use by the Taxpayer in the provision of its distribution and evaluation services. The printed materials were correctly held taxable in the audit.
I note that the Taxpayer has paid the assessment in full. In accordance with the above determination, there is no basis to issue a refund. As previously discussed, the Taxpayer should begin paying sales or use tax on purchases of blank tape used in the provision of its services. If you have any questions regarding this matter, please contact ***** of the department's Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/21953S
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This will reply to your letter in which you seek the correction of a retail sales and use tax assessment issued to ***** (the "Taxpayer") for the period of December 1992 through November 1998. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer provides a service in which it distributes video and audio tapes of public service announcements for broadcast by media outlets such as television and radio stations. The Taxpayer solicits feedback from the media outlets concerning the amount of broadcast time for each public service announcement and the frequency of the broadcasts. The Taxpayer compiles this information and periodically reports this information to clients. The distribution and evaluation services are typically provided to government agencies and nonprofit organizations.
The Taxpayer maintains that the department's assessment of use tax on purchases of printed materials used in the provision of its services is erroneous. The printed materials include letterhead containing the Taxpayer's printed logo, business reply cards, package labels, mailers, and postcards. These materials are included in the video and audio packages that are distributed to the media outlets and are used to mail the packages and solicit feedback from the media outlets. The Taxpayer states that the exemption for audiovisual works and the exemption for printed materials apply to purchases of the printed materials.
DETERMINATION
Audiovisual Works Exemption
Code of Virginia § 58.1-609.6(6)(a)(iii) provides an exemption from sales and use tax for "the transfer or use of tangible personal property, including, but not limited to, scripts, musical scores, storyboards, artwork, film, tapes and other media, incident to the performance of such services or fabrication . . . ."
The exemption referenced above is for tangible personal property that is used to produce or create audiovisual works such as the television and radio commercials the Taxpayer distributes. However, the Taxpayer does not produce such audiovisual works. This exemption applies to property used in the actual production of the commercials and public service announcements - an activity that has been completed when the Taxpayer receives the copy that is used to make dubs for distribution. Likewise, the printed materials are used in connection with the Taxpayer's service of distributing and evaluating broadcasts of the public service messages. The printed materials are not used directly in the production or fabrication of audiovisual works. For this reason, the audiovisual works exemption does not apply to the Taxpayer's purchases of the printed materials.
I note that the auditor's comments indicate that blank tapes were treated as exempt items in the Taxpayer's audit. Based on the above, the Taxpayer does not enjoy an exemption on purchases of blank tapes. On a prospective basis, the Taxpayer must pay the applicable sales or use tax on purchases of blank tapes.
Printed Materials Exemption
Code of Virginia § 58.1-609.6(4) provides an exemption from sales and use tax for "[c]atalogs, letters, brochures, reports, and similar printed materials, except administrative supplies, the envelopes, containers and labels used for packaging and mailing same ... when stored for twelve months or less in the Commonwealth and distributed for use without the Commonwealth." (Emphasis added.) The term "similar printed materials" is defined in Title 23 of the Virginia Administrative Code 10-210-260 (copy enclosed) as "printed materials used for promotional purposes, except administrative supplies." Based on the Taxpayer's use of the printed materials, these items are administrative supplies for use by the Taxpayer in the provision of its distribution and evaluation services. The printed materials were correctly held taxable in the audit.
I note that the Taxpayer has paid the assessment in full. In accordance with the above determination, there is no basis to issue a refund. As previously discussed, the Taxpayer should begin paying sales or use tax on purchases of blank tape used in the provision of its services. If you have any questions regarding this matter, please contact ***** of the department's Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/21953S
Rulings of the Tax Commissioner