Tax Type
Retail Sales and Use Tax
Description
In-house training videos; Video film production
Topic
Exemptions
Property Subject to Tax
Date Issued
03-29-2001
March 29, 2001
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 for **** (the "Taxpayer") for the period of January 1997 through December 1999.
FACTS
The Taxpayer is in the video film production business. The Taxpayer operates a comprehensive production facility, which includes a studio, editing suites, graphics capabilities and duplicating equipment. The Taxpayer performs all aspects of film production including scriptwriting, still and motion picture photography, sound, music, special effects, mixing, dubbing, animation, editing, stunt work, etc. The Taxpayer produces audiovisual films on both videotapes and CD-ROM. The Taxpayer's products include publications, videos and computer software utilized by corporate and government entities for training of employees in the areas of discrimination, sexual harassment, industrial accidents, and the hazards of health-care work. All items produced by the Taxpayer are for the purpose of in-house training within a corporate or government environment.
The Taxpayer was audited and assessed tax on equipment used in its audiovisual production facility. The Taxpayer believes this equipment qualifies for the retail sales and use tax exemption provided under Code of Virginia § 58.1-609.6(6). The Taxpayer is also requesting the audit penalty associated with this audit assessment be waived.
DETERMINATION
The 1995 General Assembly passed legislation which provided a retail sales and use tax exemption for the following:
1) The sale, rental, and lease of films, audio or videotapes, or other audiovisual works intended for licensure, distribution, broadcast, commercial exhibition, or for use in the production of another audiovisual work.
2) All creative works and services used in connection with the production of any portion of an audiovisual work intended for distribution, broadcast, commercial exhibition, or for use in the production of another work.
3) Charges for production facilities in those situations where a tangible product is transferred.
4) Equipment and parts and accessories, used in the production of audiovisual works intended for distribution, broadcast, and other commercial exhibition, or for use in the production of another work.
In order for the exemption set forth above to apply, the department looks to the purpose for which the audiovisual work is produced. It is the department's longstanding policy that the audiovisual work must be licensed, distributed, broadcast, or commercially exhibited for viewing by the "general public." This policy is upheld in Public Document 95-198 (July 31, 1995), copy enclosed, which states "the exemption does not extend to producers of tapes and films not intended for commercial distribution including in-house training tapes and corporate pieces generally." Emphasis added.
Based on the information furnished to this office, the sole product produced by the Taxpayer is in-house training videos for both corporate and government entities, not for commercial distribution. For this reason, I find no basis for revising the audit assessment. However, since this is the first audit of the Taxpayer since the 1995 law change, I will agree to waive the audit penalty associated with this assessment.
Upon receipt of your payment in the amount of , the audit penalty will be abated. Payment should be made within 30 days of the date of this letter and sent to ****, Office of Tax Policy, P.O. Box 1880, Richmond, Virginia 23218-1880. If you should have any questions concerning this determination, you may call **** at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/31429K
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 for **** (the "Taxpayer") for the period of January 1997 through December 1999.
FACTS
The Taxpayer is in the video film production business. The Taxpayer operates a comprehensive production facility, which includes a studio, editing suites, graphics capabilities and duplicating equipment. The Taxpayer performs all aspects of film production including scriptwriting, still and motion picture photography, sound, music, special effects, mixing, dubbing, animation, editing, stunt work, etc. The Taxpayer produces audiovisual films on both videotapes and CD-ROM. The Taxpayer's products include publications, videos and computer software utilized by corporate and government entities for training of employees in the areas of discrimination, sexual harassment, industrial accidents, and the hazards of health-care work. All items produced by the Taxpayer are for the purpose of in-house training within a corporate or government environment.
The Taxpayer was audited and assessed tax on equipment used in its audiovisual production facility. The Taxpayer believes this equipment qualifies for the retail sales and use tax exemption provided under Code of Virginia § 58.1-609.6(6). The Taxpayer is also requesting the audit penalty associated with this audit assessment be waived.
DETERMINATION
The 1995 General Assembly passed legislation which provided a retail sales and use tax exemption for the following:
1) The sale, rental, and lease of films, audio or videotapes, or other audiovisual works intended for licensure, distribution, broadcast, commercial exhibition, or for use in the production of another audiovisual work.
2) All creative works and services used in connection with the production of any portion of an audiovisual work intended for distribution, broadcast, commercial exhibition, or for use in the production of another work.
3) Charges for production facilities in those situations where a tangible product is transferred.
4) Equipment and parts and accessories, used in the production of audiovisual works intended for distribution, broadcast, and other commercial exhibition, or for use in the production of another work.
In order for the exemption set forth above to apply, the department looks to the purpose for which the audiovisual work is produced. It is the department's longstanding policy that the audiovisual work must be licensed, distributed, broadcast, or commercially exhibited for viewing by the "general public." This policy is upheld in Public Document 95-198 (July 31, 1995), copy enclosed, which states "the exemption does not extend to producers of tapes and films not intended for commercial distribution including in-house training tapes and corporate pieces generally." Emphasis added.
Based on the information furnished to this office, the sole product produced by the Taxpayer is in-house training videos for both corporate and government entities, not for commercial distribution. For this reason, I find no basis for revising the audit assessment. However, since this is the first audit of the Taxpayer since the 1995 law change, I will agree to waive the audit penalty associated with this assessment.
Upon receipt of your payment in the amount of , the audit penalty will be abated. Payment should be made within 30 days of the date of this letter and sent to ****, Office of Tax Policy, P.O. Box 1880, Richmond, Virginia 23218-1880. If you should have any questions concerning this determination, you may call **** at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/31429K
Related Documents
Rulings of the Tax Commissioner