Tax Type
Retail Sales and Use Tax
Description
Document conversion and reformatting; Print ready files; Computer processing and data preparation
Topic
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
10-11-2000
October 11, 2000
Re: Request for Ruling: Retail and Use Tax
Dear ****
This will reply to your letter in which you request a ruling as to the retail sales and use tax application to **** (the "Taxpayer"). I apologize for the delay in replying to your letter.
The Taxpayer is a Delaware corporation and a wholly-owned subsidiary of a foreign company. The Taxpayer also has an operation in Virginia. The Taxpayer is in the business of converting manuscripts, studies, and other documents into computer compatible files which its customers (i.e., publishers) will later use for printing tax exempt publications or publishing on the Internet.
The Taxpayer receives incoming documents from publishers or directly from the authors, then scans, re-sizes, and/or formats the document, and returns the reformatted document to the publisher, either in the form of a computer disk or electronically. The re-formatted documents are reviewed for correctness by the publisher, and if necessary returned to the Taxpayer for corrections. Upon completion of all corrections, the Taxpayer forwards print-ready final formatted files to the publisher or to another vendor for publishing on the Internet. The Taxpayer requests a ruling on the application of the retail sales and use tax to the purchase of hardware and software used to support the services it provides, and also as to the purchase of general office supplies.
Basically, the Taxpayer is requesting a ruling as to its classification under the Standard Industrial Classification (hereinafter "SIC") Manual published by the U.S. Department of Commerce. More specifically, the Taxpayer seeks clarification from the department whether it should fall under Industry Group 2791, "Typesetting", or Industry Group 7374, "Computer Processing and Data Preparation and Processing Services". If the Taxpayer falls under Group 2791, the industrial manufacturing exemption may be available for the Taxpayer's equipment. If the Taxpayer falls under Group 7374, the Taxpayer is classified as providing a service and must pay the tax on equipment and supplies used in providing the service.
In order to answer this question, we must look to the Major Group descriptions as a whole. Major Group 27 is applicable to establishments primarily engaged in printing, publishing and similar industries, whereas Major Group 73 is applicable to establishments primarily engaged in rendering business services. While the Taxpayer is engaged in a form of electronic typesetting or pre-press activity, the Taxpayer is not primarily engaged as a printer or publisher. Therefore, based on the information provided, Industry Group 2791 is not applicable to the Taxpayer. The Taxpayer's operation is more aptly described in Industry Group 7374, i.e. the provision of computer processing and data preparation. Therefore, I must conclude that the Taxpayer is providing business services, and must pay the tax on all equipment and supplies used in providing such service.
If you should have any questions concerning this ruling, please contact ****, Office of Tax Policy, at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/22040K
Re: Request for Ruling: Retail and Use Tax
Dear ****
This will reply to your letter in which you request a ruling as to the retail sales and use tax application to **** (the "Taxpayer"). I apologize for the delay in replying to your letter.
FACTS
The Taxpayer is a Delaware corporation and a wholly-owned subsidiary of a foreign company. The Taxpayer also has an operation in Virginia. The Taxpayer is in the business of converting manuscripts, studies, and other documents into computer compatible files which its customers (i.e., publishers) will later use for printing tax exempt publications or publishing on the Internet.
The Taxpayer receives incoming documents from publishers or directly from the authors, then scans, re-sizes, and/or formats the document, and returns the reformatted document to the publisher, either in the form of a computer disk or electronically. The re-formatted documents are reviewed for correctness by the publisher, and if necessary returned to the Taxpayer for corrections. Upon completion of all corrections, the Taxpayer forwards print-ready final formatted files to the publisher or to another vendor for publishing on the Internet. The Taxpayer requests a ruling on the application of the retail sales and use tax to the purchase of hardware and software used to support the services it provides, and also as to the purchase of general office supplies.
RULING
Basically, the Taxpayer is requesting a ruling as to its classification under the Standard Industrial Classification (hereinafter "SIC") Manual published by the U.S. Department of Commerce. More specifically, the Taxpayer seeks clarification from the department whether it should fall under Industry Group 2791, "Typesetting", or Industry Group 7374, "Computer Processing and Data Preparation and Processing Services". If the Taxpayer falls under Group 2791, the industrial manufacturing exemption may be available for the Taxpayer's equipment. If the Taxpayer falls under Group 7374, the Taxpayer is classified as providing a service and must pay the tax on equipment and supplies used in providing the service.
In order to answer this question, we must look to the Major Group descriptions as a whole. Major Group 27 is applicable to establishments primarily engaged in printing, publishing and similar industries, whereas Major Group 73 is applicable to establishments primarily engaged in rendering business services. While the Taxpayer is engaged in a form of electronic typesetting or pre-press activity, the Taxpayer is not primarily engaged as a printer or publisher. Therefore, based on the information provided, Industry Group 2791 is not applicable to the Taxpayer. The Taxpayer's operation is more aptly described in Industry Group 7374, i.e. the provision of computer processing and data preparation. Therefore, I must conclude that the Taxpayer is providing business services, and must pay the tax on all equipment and supplies used in providing such service.
If you should have any questions concerning this ruling, please contact ****, Office of Tax Policy, at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/22040K
Rulings of the Tax Commissioner