Document Number
07-125
Tax Type
Retail Sales and Use Tax
Description
Assessed tax on the purchase of a video, catalog stands, and room planner guides
Topic
Exemptions
Date Issued
08-17-2007


August 17, 2007



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 October 2002 through September 2005.

FACTS


The Taxpayer is a manufacturer and importer of wooden household furniture. As a result of the Department's audit, the Taxpayer was assessed tax on the purchase of a video, catalog stands, and room planner guides. The Taxpayer requests that the assessment on these items be removed from the audit. Each item will be addressed separately below.

DETERMINATION


Video

The Taxpayer hired an advertising agency to produce a video for one of its furniture collections. The Taxpayer asserts that the video is used at its showroom and at some of its dealer locations around the country. The video is played on a television screen in a continuous loop at both locations. The Taxpayer contends that the video was purchased to be a point-of-purchase advertising tool and qualifies as exempt advertising.

Virginia Code § 58.1-609.6 5 provides that the retail sales and use tax does not apply to advertising as defined in Va. Code § 58.1-602. Virginia Code § 58.1-602 defines advertising as "the planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting and other media, including, without limitation, the providing of concept, writing, graphic design, mechanical art, photography and production supervision."

In Public Document (P.D.) 96-78 (5/6/96), the taxpayer was assessed tax on the purchase of a merchandising video. Copies of the video were distributed to the taxpayer's retail distributors and were used as a point-of-sale merchandising tool to promote the taxpayer's products. The Tax Commissioner stated that in order to determine if a particular mode of communication developed by an advertising business qualifies for tax exemption as "media advertising," it is necessary to determine whether the communication mode is intended to convey promotional information to the public generally. The Tax Commissioner concluded that the video at issue qualified as media advertising.

It has been the Department's longstanding policy that in order for advertising to qualify as "media advertising," such advertising must be directed toward and available to the general public.

Based on the information provided, the video at issue was intended to convey promotional information to the public generally. The video, when shown at the Taxpayer's showroom and at its dealers' locations, is directed toward and available to the general public. Accordingly, the video at issue qualifies as exempt media advertising pursuant to Va. Code § 58.1-609.6 5 and will be removed from the audit.

Catalog Stands

The Taxpayer purchased stands used to hold the Taxpayer's catalog. The stands were sent to its dealers around the country. The Taxpayer contends that the stands are an advertising tool meant to make it convenient for the consumer to view its products and as such qualify for the advertising exemption.
    • Title 23 of the Virginia Administrative Code (VAC) 10-210-3010 H provides:
    • When stored in Virginia for 12 months or less and mailed to or distributed outside of Virginia, the following printed materials are exempt from the tax: . . . Printed point-of-purchase sales devices, including display racks, animated and action pieces, posters and banners.

In P.D. 98-97 (5/20/98), the taxpayer was assessed tax on the purchase of point-of-­purchase displays. Each display consisted of a frame that supported and displayed printed graphics describing the taxpayer's products, pockets to hold printed brochures, product information tear sheets, and a window unit. The Tax Commissioner determined that the display racks were exempt because the printed materials could not be displayed without some means of support.

In this instance, the catalog stands are not the same as the standing window display racks addressed in P.D. 98-97. The stand sits on the counter and holds the catalog to make viewing more convenient for the customers. The catalog does not need to be supported by the stand, and could just as easily sit on the counter rather than on the stand. Additionally, there is no printing on the stands. Finally, the catalog stands in this instance are not located near a furniture display. The catalog stands are not exempt display racks as envisioned in Title 23 VAC 10-210-3010 H and interpreted in P.D. 98-97. Accordingly, the assessment of tax on the catalog stands is correct.

Room Planner Guides

The Taxpayer purchases room planner guides that are sent to its dealers around the country. The dealer uses the guide on a scaled grid to show its customer how the Taxpayer's furniture would look in the customer's home. The Taxpayer contends that the guide is printed advertising that qualifies for exemption under Title 23 VAC 10-210-3010 H tool.

Based on the information provided, the room planner guides do not qualify for exemption under Title 23 VAC 10-210-3010 H. The guides are used in the dealer's store as an administrative tool and are not used "for external promotional purposes."

CONCLUSION


Based on this determination, the audit will be returned to the audit staff to make the necessary adjustments to the audit and the assessment. A revised bill, with interest accrued to date, will be mailed to the Taxpayer once the adjustments have been made. No additional interest will accrue provided the outstanding assessment is paid within 30 days of the date of the bill.

The Code of Virginia sections, regulation and public documents cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this response, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
                • Sincerely,

                • Janie E. Bowen
                  Tax Commissioner



AR/1-1035048602P

Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46