Document Number
06-117
Tax Type
Retail Sales and Use Tax
Description
Application of tax on printed advertising materials purchased by clients
Topic
Exemptions
Records/Returns/Payments
Date Issued
10-16-2006


October 16, 2006





Re: Request for Ruling: Retail Sales and Use Tax

Dear *****:

This will reply to your letter in which you request a ruling on the application of retail sales and use tax to printed advertising materials purchased by your client, ***** (the "Taxpayer"). I apologize for the delay in responding to your letter.

FACTS


The Taxpayer is a financial institution that originates and sells mortgage loans in Virginia. The Taxpayer purchases forms and envelopes used for direct mail advertising from printers located in Virginia and outside Virginia. In some cases, the Taxpayer takes physical possession of the printed materials from the printers and arranges for delivery of the materials to a direct mail business located in Virginia. In other cases, the Taxpayer directs the printers to deliver the printed materials to the same direct mail business located in Virginia.

The Virginia direct mail business prepares the materials for mailing and places the materials in the U.S. Mail for distribution within and outside Virginia. The Taxpayer states that approximately 92 percent of the mailings are distributed outside Virginia. The printers charge the Taxpayer Virginia sales tax on its purchases of the printed materials. The Taxpayer suggests that the printed materials distributed outside Virginia are exempt from the tax and seeks confirmation from the Department that this is correct. If the printed materials are exempt, the Taxpayer asks for procedural guidance from the Department with respect to claiming the exemption, how to obtain refunds of tax paid in error and how to pay the tax on the taxable portion of the printed materials.

RULING


Virginia Code § 58.1-609.6 4 provides an exemption from the retail sales and use tax for:
    • Catalogs, letters, brochures, reports, and similar printed materials, except administrative supplies, the envelopes, containers and labels used for packaging and mailing same .... when stored for 12 months or less in the Commonwealth and distributed for use without the Commonwealth.

The Taxpayer purchases the printed materials from printers and either the Taxpayer or the printers provide the materials to a direct mail business in Virginia. The printed materials and the envelopes used to mail the materials are stored for less than 12 months in Virginia before they are placed in the U.S. Mail for distribution in Virginia and outside Virginia. The printed materials are not administrative supplies as the term is defined in Va. Code § 58.1-609.6 4.

Based on the information presented by the Taxpayer, the printed materials that are stored for less than 12 months in Virginia and distributed outside Virginia qualify for exemption under Va. Code § 58.1-609.6 4. To purchase the printed materials exempt of the tax, the Taxpayer should provide its printers with a completed certificate of exemption, Form ST-10A, with box # 1 marked. The Taxpayer can request the printer to charge Virginia sales tax on the taxable portion of the printed materials if they can be identified at the time of purchase. Alternatively, the Taxpayer may purchase all the printed materials exempt of the tax and accrue Virginia use tax on the taxable portion. The Taxpayer must register with the Department to file Consumer Use Tax returns to report and pay the tax. Regardless of the method used, the Taxpayer must maintain adequate documentation showing that the proper amount of Virginia sales and use tax has been paid.

Refunds

The Taxpayer may request refunds of sales taxes erroneously paid on exempt printed materials directly from the printers. The printers are entitled to claim a credit on their Virginia returns for the sales taxes refunded. The Taxpayer should identify the amount or percentage of exempt printed materials that qualify for refund and provide this information to the printer in writing with a copy of Form ST-10A. Refund requests must be made within the three-year period of limitations provided in Va. Code § 58.1­1823. If the Taxpayer is unable to obtain a refund because a printer has gone out of business or for some other valid reason, the Taxpayer may file for the refund directly with the Department. The request should be mailed to: Virginia Department of Taxation, Customer Services Section, P.O. Box 1115, Richmond, Virginia 23218-1115.

CONCLUSION


The Taxpayer should note that printing purchased for its own use and consumption, or for storage in Virginia for a period of more than 12 months, is taxable. Any calculations used by the Taxpayer to make exempt purchases or to claim refunds should take into consideration printing purchased by the Taxpayer for its own use and consumption, or for storage in Virginia for a period of more than 12 months.

This ruling will not bind the Department in any future audit of the Taxpayer, if it is determined that the Taxpayer's calculation of exempt purchases of printed materials does not accurately reflect its actual purchases of printing for mailing to Virginia residents or for its own use or consumption in Virginia.

The Code of Virginia sections cited, along with other reference documents, are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. The Taxpayer may also use the Department's web site to register on-line to file consumer use tax returns at www.ireg.tax.virginia.gov. If you have any questions concerning this ruling, please contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
                • Sincerely,


                  Janie E. Bowen
                  Tax Commissioner



AR/55656S


Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46