09-34 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Taxpayer has not provided adequate evidence to support its exemption request.

Topic

Exemptions

Records/Returns/Payments

Date Issued

03-31-2009

March 31, 2009

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

Dear *****:

This is in response to your letter submitted on behalf of ***** (the "Taxpayer"), in which you request a reconsideration of the prior determination issued to the Taxpayer on June 18, 2008. The Taxpayer seeks correction of the retail sales and use tax assessment issued for the period October 2003 through August 2006. I apologize for the delay in responding to your letter.

FACTS

The Taxpayer is an advertising company that provides concept, writing, graphic design, mechanical art, photography and production supervision for generating multimedia vehicles. The Taxpayer seeks reconsideration of the determination issued with respect to certain transactions held taxable in the audit. The invoices at issue will be addressed below.

DETERMINATION

Invoice *****

The Taxpayer contends the advertising exemption applies to the sale of the CD presentation at issue. The Taxpayer states the CD presentation is available to the general public through its client's website and is also used by its client at trade shows. The Taxpayer further contends that the CD presentation is part of an advertising campaign. Additionally, the Taxpayer provided a letter of appreciation from one of its clients regarding the services rendered by the Taxpayer.

Pursuant to Va. Code § 58.1-205, "[a]ny assessment of tax by the Department shall be deemed prima facie correct." The burden of proving that the assessment is incorrect lies with the Taxpayer. "Statutes granting tax exemptions are construed strictly against the taxpayer." Commonwealth v. Community Motor Bus Co., Inc., 214 Va. 155, 198 S.E.2d 619 (1973). "Exemption from taxation is the exception, and where there is any doubt, the doubt is resolved against the one claiming exemption." Golden Skillet Corp. v. Commonwealth, 214 Va. 276, 199 S.E.2d 511 (1972).

A member of my staff has reviewed the Taxpayer's client's website and the letter of appreciation presented with the Taxpayer's request for reconsideration. Based on a review of the website, it is unclear how the CD presentation was to be disseminated via the website. My staff member observed a video presentation on the website, but had no way of knowing if this presentation is the same presentation that is at issue in the Taxpayer's reconsideration request. Additionally, following a review of the letter of appreciation, it is unclear if the CD presentation at issue is related to any of the items listed in the letter of appreciation provided by the Taxpayer to its client. The Taxpayer still has not provided specific evidence regarding what was provided to its client in this transaction. The Taxpayer also has not provided evidence demonstrating how its client makes the CD presentation available to the general public. The Taxpayer contends that the CD presentation is part of an advertising campaign, yet it has failed to provide specific evidence to support this contention. Based upon the type of business the Taxpayer is engaged in, it seems likely that it would develop advertising campaigns for its clients. However, in this instance, with respect to this CD presentation, the Taxpayer has not proven that this transaction is subject to the advertising exemption.

Invoice ***** and Invoices *****

The Taxpayer asserts that the video testimonial at issue (Invoice *****) is part of an ongoing television advertising campaign. The Taxpayer further contends the photography at issue (Invoices *****, *****, ******) was used for a specific advertising and marketing campaign.

With respect to these invoices, and pursuant to Va. Code § 58.1-205, the Taxpayer has failed to meet its burden of proving that the assessment of tax is incorrect. Additionally, the Taxpayer has failed to provide sufficient evidence to support its contention that the advertising exemption applies.

CONCLUSION

With regard to the retail sales and use tax, taxation is the rule unless an exemption provided for in Title 58.1 of the Code of Virginia applies. However, a taxpayer cannot merely state an exemption applies without providing adequate evidence to support the application of the exemption. In this instance, the Taxpayer has not provided adequate evidence to support its contention that the tax as assessed is incorrect and that the advertising exemption applies to any of the transactions at issue. Accordingly, the assessment is correct as issued and the invoices at issue will not be removed from the audit. This is my final determination with respect to this audit period.

A revised bill, with interest accrued to date, will be mailed shortly to the Taxpayer. No additional interest will accrue provided the outstanding assessment is paid within 30 days of the date of the bill. The Taxpayer should remit payment to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, Attn: *****, Post Office Box 27203, Richmond, Virginia 23261-7203.

The Code of Virginia section and public document 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. If you have any questions about this response, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.

- - - - Sincerely,

- - - - Janie E. Bowen
        Tax Commissioner

AR/1-2552083005.P

Rulings of the Tax Commissioner