Tax Type
Retail Sales and Use Tax
Description
Cleaning kits included in the box of thermal labels
Topic
Manufacturing Exemption
Date Issued
03-04-2005
March 4, 2005
Re: Request for Ruling: Retail Sales and Use Tax
Dear ********************:
This will reply to your letter and recent conversation with a member of my staff in which you seek a ruling on the application of the retail sales and use tax to products sold by ***** (the "Taxpayer"). I apologize for the delay in the Department's response.
FACTS
The Taxpayer operates a network of franchise-owned pizza stores. The Taxpayer's distribution center purchases thermal labels for resale to the franchise locations in Virginia. The thermal labels are affixed to the packaging containing the customer's food order. The label shows the customer's itemized food order, delivery address, phone number, and price. The Taxpayer also sells a cleaning kit that is used to clean the printer used to print the customer's information on the labels. The cleaning kit is included in the box of thermal labels shipped to the pizza stores. The Taxpayer has treated the thermal labels as exempt packaging materials and charges no tax on their sale to the franchise stores. You ask if the cleaning kits included in the box of thermal labels and shipped to stores in Virginia changes the taxability of the thermal labels.
RULING
Thermal Labels
Title 23 of the Virginia Administration Code 10-210-800 provides that the retail sales and use tax does not apply to
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- purchases of labels, tags or nameplates when used solely for packaging tangible personal property for sale. These purchases become part of the product for sale or resale. The tax does not apply to purchases of such items when they provide information about the nature, quality, maker, price, size, operation, maintenance or destination of the tangible personal property packaged for sale. The tax does apply to purchases of inserts and invoices.
The regulation strictly construes the exemption for labels, tags or nameplates when used for packaging tangible personal property only.
The Tax Commissioner ruled in Public Document (P.D.) 92-56 (4/29/92) that a four-copy "slip" attached to pizza delivery boxes did not qualify for exemption because the slip was not used solely for packaging tangible personal property for sale. The first three copies served an administrative function because they gave details about the sale transaction. The fourth copy provided information on the nature, price, size and destination of the package, but could be construed as the customer's copy of the invoice or a receipt. Based on this, the Tax Commissioner determined that the slip was "essentially equivalent to invoices which are taxable."
Based on the information provided, the thermal labels do not qualify as exempt packaging materials. The label is similar to the fourth copy addressed in P.D. 92-56, i.e., it can be construed as the customer's copy of the invoice or a receipt. Therefore, the labels are not used solely for packaging tangible personal property for sale, as required by the regulation. Thus, the Taxpayer is required to charge and collect the Virginia sales tax on sales of thermal labels to Virginia store locations. The Taxpayer must implement this change effective upon receipt of this letter.
Cleaning Kits
The cleaning kits are provided as part of the sale transaction of the thermal labels and are used by the franchise stores in an administrative function, i.e., to clean the printer that prints the customer's information on the thermal labels. In accordance with the regulation and the above decision, the cleaning kits are taxable.
This response is based on the facts provided as summarized above. Any change in the facts or the introduction of new facts may lead to a different result.
The regulation and Public Document cited, along with other reference documents, are available on-line in the Tax Policy Library section of the Department of Taxation's website, located at www.policylibrary.tax.virginia.gov. If you have any questions about this response, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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- Kenneth W. Thorson
Tax Commissioner
- Kenneth W. Thorson
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AR/51322T
Rulings of the Tax Commissioner