Tax Type
Retail Sales and Use Tax
Description
Must manufacturer collect tax for ongoing sales not for resale
Topic
Collection of Tax
Property Subject to Tax
Date Issued
12-04-2001
December 4, 2001
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****
This is in reply to your letter in which you request a ruling regarding the application of the retail sales and use tax to printing services. I apologize for the delay in the department's response.
FACTS
***** (the "Taxpayer") provides financial products and business management services to clients nationally. The Taxpayer operates a print services group for its own internal use and for distribution of information to members. Because the Taxpayer's printing is for its own use and consumption, the Taxpayer pays the tax on all of its purchases of supplies and equipment. None of these items are purchased exempt of the tax for resale.
The Taxpayer has been asked by another business (the "Customer") to provide printing services for the purpose of printing brochures, letters and envelopes and other documents as needed on a regular basis. Further, the supplies needed for the Customer's project would represent a very small portion of the Taxpayer's supplies. Therefore, the Taxpayer asks if it may continue to pay the tax on the purchase of such supplies and not be required to charge sales tax on the items produced for and sold to the Customer.
RULING
Code of Virginia § 58.1-603 imposes the sales tax upon every person who makes sales at retail of tangible personal property in Virginia. Section 58.1-602 defines a "sale" as "any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever of tangible personal property and any rendition of a taxable service for a consideration." (Emphasis added.)
Pursuant to Title 23 of the Virginia Administrative Code (VAC) 10-210-3010, the sale of customer printing is deemed to be the sale of tangible personal property. Accordingly, when making sales of printing to the Customer, the Taxpayer is required to: (1) register as a dealer for the collection of the tax, (2) charge and collect the tax on the total sales price of printing sold to the Customer, and (3) remit that tax to the department on monthly sales and use tax returns. As a registered dealer, the Taxpayer would be able to purchase items that become a component part of the printed materials sold to its customers exempt of the tax for resale.
With regard to the purchase of printing supplies, the Taxpayer may follow one of two methods in accounting for sales tax.
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- Exempt Purchases: The Taxpayer may present a properly completed Resale Exemption Certificate, Form ST-10, to its suppliers for the purchase of all component items. Subsequently, the Taxpayer will accrue the tax on the cost of those items used in printing for its own use, and report the tax to the Commonwealth in the same manner currently in use when a vendor does not apply the tax to purchases.
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- Taxable Purchases: Alternatively, the Taxpayer may continue to pay the tax on all purchases of materials used in all printing. On those purchases of supplies used in customer projects, the Taxpayer may determine the cost price of materials used and request a refund of the tax from its supplier in conjunction with the presentation of a properly completed Exemption Certificate, Form ST-10.
Regardless of how the Taxpayer decides to account for its purchases of supplies and component parts, the subsequent sales of printing to the customer are taxable.
Other Printing Issues
Industrial manufacturing: In some instances, printers are eligible for the industrial manufacturing exemption set out in 23 VAC 10-210-920. This exemption applies generally to equipment, machinery and tools used directly and preponderantly (i.e., more than 50%) in manufacturing items for sale or resale. Because printing for sale or resale is only a very small part of the Taxpayer's current operation, the industrial manufacturing exemption is not currently applicable. This may change, however, if sales of printing to customers become a larger portion of the Taxpayer's activities.
Temporary storage of printed materials: As set out in 23 VAC 10-210-3010(H), an exemption applies to the sale of certain printed items when stored in Virginia for 12 months or less and mailed or distributed for use outside Virginia. Customers making such exempt purchases must provide the printer with a Certificate of Exemption, Form ST-10A.
Conclusion
The Taxpayer must register for the collection and payment of the retail sales tax, and may use the Certificate of Exemption, Form ST-10, to purchase exempt of the tax those component items used in printing for sale to customers. In the alternative, the Taxpayer may apply to the vendor for a refund of taxes erroneously paid on exempt supplies. I note that this same information has been provided to the Taxpayer in a telephone discussion with a member of the Appeals and Rulings staff.
I have enclosed the regulations cited above as well as a registration application. If you wish, you may register online at www.tax.state.va.us. You may also contact the department's ***** District Office at ***** if you have any additional questions regarding the registration process or the application of the tax. That office is located at *****.
If you have any questions regarding this letter, you may contact ***** of the department's Office of Policy and Administration, Appeals and Rulings, via e-mail at *****@tax.state.va.us or at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
AR/29168Q
Rulings of the Tax Commissioner