Tax Type
Retail Sales and Use Tax
Description
Classification of a graphic design business as an advertising business
Topic
Property Subject to Tax
Date Issued
03-05-2001
March 5, 2001
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This is in reply to your letter in which you seek a correction of the department's retail sales and use tax audit assessment issued to **** (the "Taxpayer"), for the period May 1996 through February 1999. I apologize for the delay in the department's response.
FACTS
The Taxpayer is a graphic designer and a communications company, and was classified as an advertising agency in the current audit. It is this classification that the Taxpayer contends is in error. In its prior audit, the Taxpayer states that it was audited as a retailer making retail sales, and that it was instructed to follow that classification for the future. The Taxpayer seeks a reconsideration of the current audit results on the basis that it was properly classified in its initial audit as a retailer.
DETERMINATION
Based on a review of the prior and current audits, I find that comments in the prior audit indicate that the Taxpayer was providing custom printing to the public and private sector, and in accordance with the regulations, was considered a retailer with respect to such printing. I also note specific comments by the prior auditor that advised the Taxpayer to operate as a retailer for sales tax purposes. Accordingly, I have instructed the department's **** District Office to revise the current audit in a manner consistent with the advice given to the Taxpayer in the prior audit, i.e., audit the Taxpayer as a retailer. The department's auditor will contact the Taxpayer for the purpose of revising the current audit, and will review and address any issues raised in the Taxpayer's letter.
With regard to future audits, the Taxpayer will receive additional instructions from the auditor on exactly how it should be operating with respect to its purchases and sales. For your information, I have outlined the relevant retail sales and use tax policies below.
Based on the information provided, the Taxpayer is currently operating as an advertising business, as defined in Code of Virginia § 58.1-602 and regulations issued by the department. Code of Virginia § 58.1-602 defines "advertising" as "[t]he 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 under Code of Virginia § 58.1-602 is deemed to be the user or consumer of all tangible personal property purchased for use in such advertising.
Title 23 of the Virginia Administrative Code (VAC) 10-210-40, copy enclosed, defines "advertising" as "the planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting or other media . . . ." Advertising businesses are engaged in providing professional services and are the users and consumers of all tangible property purchased for use in such business. Therefore, the tax applies to all purchases by an advertising business, including printing. See Title 23 VAC 10-210-41(B).
If you should have any questions regarding this matter, please contact **** of the department's Office of Tax Policy at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/23868Q
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This is in reply to your letter in which you seek a correction of the department's retail sales and use tax audit assessment issued to **** (the "Taxpayer"), for the period May 1996 through February 1999. I apologize for the delay in the department's response.
FACTS
The Taxpayer is a graphic designer and a communications company, and was classified as an advertising agency in the current audit. It is this classification that the Taxpayer contends is in error. In its prior audit, the Taxpayer states that it was audited as a retailer making retail sales, and that it was instructed to follow that classification for the future. The Taxpayer seeks a reconsideration of the current audit results on the basis that it was properly classified in its initial audit as a retailer.
DETERMINATION
Based on a review of the prior and current audits, I find that comments in the prior audit indicate that the Taxpayer was providing custom printing to the public and private sector, and in accordance with the regulations, was considered a retailer with respect to such printing. I also note specific comments by the prior auditor that advised the Taxpayer to operate as a retailer for sales tax purposes. Accordingly, I have instructed the department's **** District Office to revise the current audit in a manner consistent with the advice given to the Taxpayer in the prior audit, i.e., audit the Taxpayer as a retailer. The department's auditor will contact the Taxpayer for the purpose of revising the current audit, and will review and address any issues raised in the Taxpayer's letter.
With regard to future audits, the Taxpayer will receive additional instructions from the auditor on exactly how it should be operating with respect to its purchases and sales. For your information, I have outlined the relevant retail sales and use tax policies below.
Based on the information provided, the Taxpayer is currently operating as an advertising business, as defined in Code of Virginia § 58.1-602 and regulations issued by the department. Code of Virginia § 58.1-602 defines "advertising" as "[t]he 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 under Code of Virginia § 58.1-602 is deemed to be the user or consumer of all tangible personal property purchased for use in such advertising.
Title 23 of the Virginia Administrative Code (VAC) 10-210-40, copy enclosed, defines "advertising" as "the planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting or other media . . . ." Advertising businesses are engaged in providing professional services and are the users and consumers of all tangible property purchased for use in such business. Therefore, the tax applies to all purchases by an advertising business, including printing. See Title 23 VAC 10-210-41(B).
If you should have any questions regarding this matter, please contact **** of the department's Office of Tax Policy at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/23868Q
Rulings of the Tax Commissioner