Document Number
Tax Type
Retail Sales and Use Tax
Failure to charge retail sales and use tax on separately stated service charges
Appropriateness of Audit Methodology
Date Issued

August 2, 2005

Re: § 58.1-1821 Application: Retail Sales and Use Tax

Dear *****:

This is in response to your letter in which you seek correction of the retail sales and use tax assessment issued to ***** (the "Taxpayer") for the period September 1999 through August 2002.


The Taxpayer operates a small business specializing in advertising through embroidery, screen printing, and other specialty advertising. During the audit period, the Taxpayer failed to charge retail sales and use tax on separately stated service charges. The auditor treated the untaxed embroidery, silkscreen and art fees as services provided in connection with the sale of tangible personal property. The Taxpayer contends that the amounts stated on the invoice are for labor only and should be exempt from the retail sales and use tax.


Virginia Code § 58.1-603 imposes the retail sales tax on the gross sales price of tangible personal property sold. Virginia Code § 58.1-602 defines "sales price" to mean:
    • the total amount for which tangible personal property or services are sold, including any services that are a part of the sale, valued in money, whether paid in money or otherwise, and includes any amount for which credit is given to the purchaser, consumer, or lessee by the dealer, without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any other expense whatsoever. (Emphasis added.)

When selling products, the Taxpayer will embroider, silkscreen or add specialty advertising to the product. As the advertising becomes a part of the property to be sold, the embroidery, silkscreen or other specialty advertising charge is considered a service in connection with a sale of tangible personal property. Absent any statutory exemptions to exempt the specialty advertising charges from the retail sales and use tax, specialty advertising is includible in the taxable sales price.

Accordingly, the assessment is correct as issued. I note that the assessment has been paid in full. Based on this determination, the Taxpayer is not entitled to a refund.

The Code of Virginia sections cited, along with other reference documents, are available on-line in the Tax Policy Library section of the Department's website, located at If you have any questions about this determination, you may contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
                • Sincerely,

                    • Kenneth W. Thorson
                      Tax Commissioner


Department of Taxation

                  • TO WHOM IT MAY CONCERN:

Under the authority of §§ 58.1-1 and 58.1-110 of the Code of Virginia, I hereby delegate to Gerald Gwaltney, Deputy Tax Commissioner, the authority to sign for me, in my absence, any and all documents, including, but not limited to, affidavits, warrants, rulings, appeals, offers in compromise and sales tax revocations.

This authority shall not extend to matters or documents related to my service on any statutorily created board or commission, including, but not limited to, the Compensation Board and Treasury Board.

This authority shall become effective January 10, 2003, and shall remain in effect until revoked.

Done at Richmond, Virginia, this 13th day of January 2003.

Kenneth W. Thorson
Tax Commissioner

Acknowledgement: Gerald H. Gwaltney Date:

Done this 13th day of January 2003 in the City of Richmond, State of Virginia. My Commission expires 9-30-2003.

Sylvia J. Wesson
Notary Public Notary Seal

Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46