Tax Type
Retail Sales and Use Tax
Description
Photography; Processor vs. retail sales
Topic
Taxability of Persons and Transactions
Date Issued
08-08-2000
August 8, 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 of June 1995 through August 1998. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer is in the business of processing photographic negatives and prints. The Taxpayer also sells at retail some photographic supplies and services. The Taxpayer has four locations throughout Virginia. The Taxpayer was audited and assessed tax on photo processing equipment, parts, and supplies on the grounds that the Taxpayer is a retail establishment, and photo processing is incidental to the retail business. The Taxpayer believes it qualifies as an industrial processor based on the following:
C The majority of revenue at each location is derived from the photo processing operation.
C The majority of the floor space at each location is devoted to photo processing with the remainder devoted to retail/office space.
C Virtually all advertising done by the Taxpayer holds out each location to be a photo processing or photo finishing operation.
The Taxpayer believes it qualifies as an industrial processor in accordance with the Circuit Court of Fairfax County decision in Ritz Camera Centers, Inc. v. Department of Taxation, at Law No. 112550.
DETERMINATION
As a result of the court findings in the Ritz Camera Centers decision, the department looks at the following factors (in addition to the primary purpose of the business) in determining whether a photo processing business is primarily an industrial processor or a retailer:
C Number of transactions attributable to each aspect of the business;
C Where each activity occurs within the confines of the business establishment;
C The size of the operation and percentage of floor space attributable to each aspect of the business;
C Percentage of activity attributable to each activity; and
C Percentage of revenue attributable to each activity.
See Public Document (P.D.) 94-359 (11/28/94).
Based on the information provided in your letter and the factors outlined above, I find that the Taxpayer may be primarily engaged in the business of photo processing, with retail sales of cameras and supplies being incidental to the processing. Therefore, the industrial processing exemption may be available for the Taxpayer's purchases of photo processing equipment, parts, and supplies. An auditor from the **** Office will contact the Taxpayer to verify the figures and percentages presented in your letter. Once the auditor has verified these figures, the audit will be adjusted as appropriate, and a revised notice of assessment will be issued.
If you should have any questions regarding this matter, please contact *****, Office of Tax Policy, at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/21498K
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 of June 1995 through August 1998. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer is in the business of processing photographic negatives and prints. The Taxpayer also sells at retail some photographic supplies and services. The Taxpayer has four locations throughout Virginia. The Taxpayer was audited and assessed tax on photo processing equipment, parts, and supplies on the grounds that the Taxpayer is a retail establishment, and photo processing is incidental to the retail business. The Taxpayer believes it qualifies as an industrial processor based on the following:
C The majority of revenue at each location is derived from the photo processing operation.
C The majority of the floor space at each location is devoted to photo processing with the remainder devoted to retail/office space.
C Virtually all advertising done by the Taxpayer holds out each location to be a photo processing or photo finishing operation.
The Taxpayer believes it qualifies as an industrial processor in accordance with the Circuit Court of Fairfax County decision in Ritz Camera Centers, Inc. v. Department of Taxation, at Law No. 112550.
DETERMINATION
As a result of the court findings in the Ritz Camera Centers decision, the department looks at the following factors (in addition to the primary purpose of the business) in determining whether a photo processing business is primarily an industrial processor or a retailer:
C Number of transactions attributable to each aspect of the business;
C Where each activity occurs within the confines of the business establishment;
C The size of the operation and percentage of floor space attributable to each aspect of the business;
C Percentage of activity attributable to each activity; and
C Percentage of revenue attributable to each activity.
See Public Document (P.D.) 94-359 (11/28/94).
Based on the information provided in your letter and the factors outlined above, I find that the Taxpayer may be primarily engaged in the business of photo processing, with retail sales of cameras and supplies being incidental to the processing. Therefore, the industrial processing exemption may be available for the Taxpayer's purchases of photo processing equipment, parts, and supplies. An auditor from the **** Office will contact the Taxpayer to verify the figures and percentages presented in your letter. Once the auditor has verified these figures, the audit will be adjusted as appropriate, and a revised notice of assessment will be issued.
If you should have any questions regarding this matter, please contact *****, Office of Tax Policy, at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/21498K
Related Documents
Rulings of the Tax Commissioner