Tax Type
Retail Sales and Use Tax
Description
Advertising services provided to school; Sports marketing business
Topic
Taxability of Persons and Transactions
Date Issued
08-18-2000
August 18, 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 an assessment issued to ***** (the "Taxpayer") for the period November 1995 through November 1998. Your request is being treated as an application for correction of an assessment under Code of Virginia § 58.1-1821. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer is a college sports marketing business that contracts with colleges and universities to promote their sports programs through the creation, marketing, and management of revenue programs. The Taxpayer provides its clients with services such as comprehensive multi-media sports marketing, management of sporting events, marketing consultation and promotional support.
An audit by the department resulted in an assessment of use tax on purchases of printed materials such as game programs, roster cards, team posters, and sport media guides. The Taxpayer purchased the printed materials under its contractual obligations to a university located in Virginia (the "University"). The Taxpayer maintains that the purchase of the printed materials represents compensation to the University for the right to use the University's name for multimedia purposes. The Taxpayer suggests that the printed materials were purchased for resale to the University because the Taxpayer receives compensation from the University for the printed materials in the form of reduced fees paid to the University for the right to use the University's name.
The Taxpayer points out that the University could purchase the same printed materials exempt of the tax, and the Taxpayer could pay an increased rights fee equal to the cost of the printed materials. The Taxpayer believes that the intent of the contract between the two parties supports its contention that the purchase of the printed materials is exempt from sales and use tax under the resale exemption.
DETERMINATION
Code of Virginia § 58.1-609.5(1) provides an exemption from sales and use tax for "[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made ...." In addition, Code of Virginia § 58.1-609.6(5) provides an exemption from sales and use tax for "advertising" which is defined in Code of Virginia § 58.1-602 as:
the planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting and other media, including, without limitation, the providing of concept, writing, graphic design, mechanical art, photography and production supervision. Any person providing advertising as defined herein shall be deemed to be the user or consumer of all tangible personal property purchased for use in such advertising.
The Taxpayer is engaged in the provision of various professional services to colleges and universities. These services include advertising services. The department's longstanding policy treats the providers of advertising services and professional services as the users or consumers of tangible personal property purchased and used in the provision of those services. As the user or consumer of purchases of tangible personal property, service providers are required to pay sales or use tax on such purchases.
Under its marketing contract with the University, the Taxpayer is required to produce and distribute certain promotional, printed materials on behalf of the University. The Taxpayer has not demonstrated that the printed materials were purchased for resale to the University, as the Taxpayer suggests. The Taxpayer does not bill or issue sales invoices to the University. The Taxpayer does not solicit a separate payment for the printed materials. The Taxpayer's cost of the printed materials is included in the total cost of the contract, and the printed materials are clearly used and consumed by the Taxpayer in the provision of the Taxpayer's services to the University.
While it may be true that the University could make purchases of the same printed materials exempt of the tax, the exemption applies only if the University purchases the printed materials. In this case, the printed materials were purchased and used by the Taxpayer.
Based on the above, the assessment is correct. I will allow the Taxpayer sixty days to pay the current balance due of $******. If payment is not received within sixty days, interest on the balance of the assessment will be updated and a revised notice of assessment issued to the Taxpayer. Payment may be mailed to ***** in the Office of Tax Policy at P. O. Box 1880, Richmond, Virginia 23218-1880. If you have any questions, please contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/22349S
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This will reply to your letter in which you seek the correction of an assessment issued to ***** (the "Taxpayer") for the period November 1995 through November 1998. Your request is being treated as an application for correction of an assessment under Code of Virginia § 58.1-1821. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer is a college sports marketing business that contracts with colleges and universities to promote their sports programs through the creation, marketing, and management of revenue programs. The Taxpayer provides its clients with services such as comprehensive multi-media sports marketing, management of sporting events, marketing consultation and promotional support.
An audit by the department resulted in an assessment of use tax on purchases of printed materials such as game programs, roster cards, team posters, and sport media guides. The Taxpayer purchased the printed materials under its contractual obligations to a university located in Virginia (the "University"). The Taxpayer maintains that the purchase of the printed materials represents compensation to the University for the right to use the University's name for multimedia purposes. The Taxpayer suggests that the printed materials were purchased for resale to the University because the Taxpayer receives compensation from the University for the printed materials in the form of reduced fees paid to the University for the right to use the University's name.
The Taxpayer points out that the University could purchase the same printed materials exempt of the tax, and the Taxpayer could pay an increased rights fee equal to the cost of the printed materials. The Taxpayer believes that the intent of the contract between the two parties supports its contention that the purchase of the printed materials is exempt from sales and use tax under the resale exemption.
DETERMINATION
Code of Virginia § 58.1-609.5(1) provides an exemption from sales and use tax for "[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made ...." In addition, Code of Virginia § 58.1-609.6(5) provides an exemption from sales and use tax for "advertising" which is defined in Code of Virginia § 58.1-602 as:
the planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting and other media, including, without limitation, the providing of concept, writing, graphic design, mechanical art, photography and production supervision. Any person providing advertising as defined herein shall be deemed to be the user or consumer of all tangible personal property purchased for use in such advertising.
The Taxpayer is engaged in the provision of various professional services to colleges and universities. These services include advertising services. The department's longstanding policy treats the providers of advertising services and professional services as the users or consumers of tangible personal property purchased and used in the provision of those services. As the user or consumer of purchases of tangible personal property, service providers are required to pay sales or use tax on such purchases.
Under its marketing contract with the University, the Taxpayer is required to produce and distribute certain promotional, printed materials on behalf of the University. The Taxpayer has not demonstrated that the printed materials were purchased for resale to the University, as the Taxpayer suggests. The Taxpayer does not bill or issue sales invoices to the University. The Taxpayer does not solicit a separate payment for the printed materials. The Taxpayer's cost of the printed materials is included in the total cost of the contract, and the printed materials are clearly used and consumed by the Taxpayer in the provision of the Taxpayer's services to the University.
While it may be true that the University could make purchases of the same printed materials exempt of the tax, the exemption applies only if the University purchases the printed materials. In this case, the printed materials were purchased and used by the Taxpayer.
Based on the above, the assessment is correct. I will allow the Taxpayer sixty days to pay the current balance due of $******. If payment is not received within sixty days, interest on the balance of the assessment will be updated and a revised notice of assessment issued to the Taxpayer. Payment may be mailed to ***** in the Office of Tax Policy at P. O. Box 1880, Richmond, Virginia 23218-1880. If you have any questions, please contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/22349S
Rulings of the Tax Commissioner