Document Number
Tax Type
Retail Sales and Use Tax
Services in connection with sale or rental of TPP
Date Issued

June 16, 2020

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

Dear *****:

This will reply to your letter submitted on behalf of ***** (the “Taxpayer”), in which you contest the retail sales and use tax assessment issued for the period March 2015 through May 2018. I apologize for the delay in responding to your letter.


The Taxpayer provides wedding and party entertainment services. The Taxpayer has sales representatives that assist customers in selecting entertainers and entertainment for their specific events. The Taxpayer provides disc jockeys, coordination services, visual packages, photo booths and other services, along with rental equipment for entertainment. 

The Department’s audit disclosed sales contracts in which sales tax was not collected on the rental of photo booths. The Taxpayer was assessed for sales in which the rentals were included with services and where only a photo booth rental was provided. The auditor also assessed use tax on photo booth supplies that were purchased by the Taxpayer. The Taxpayer received a credit for the consumer use tax paid on the photo booths, as the vendor did not charge the sales tax at the time of purchase. 

The Taxpayer contests the sales tax assessed on the rental of the photo booths, which it contends are nontaxable charges because they are provided as part of and facilitate the primary objective of the contract, the provision of disc jockey and entertainment services. The Taxpayer argues that the true object test must be applied and under this test, the services provided are the true object of the transaction. The Taxpayer states that it is the taxable user and consumer of all tangible personal property purchased for use in providing exempt services.


Virginia Code § 58.1-603 imposes the sales tax on the lease or rental of tangible personal property in the Commonwealth. The tax is computed on the gross proceeds derived from such lease or rental.

Virginia Code § 58.1-609.5 1 provides an exemption from the sales and use tax for “[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made ….” 

Title 23 of the Virginia Administrative Code (VAC) 10-210-4040 addresses the application of the tax to mixed transactions that include the sale of tangible personal property and services. A true object test is used to determine the taxability of these types of transactions. The regulation describes the “true object” test used in determining whether a transaction involving both the rendition of services and the provision of tangible personal property constitutes an exempt service or a taxable retail sale.

The Taxpayer’s rental transaction is similar to the rental of games and provision of disc jockey and clown services in Public Document (P.D.) 04-194 (10/29/2004). In that instance, the Taxpayer rented inflatable amusement games, such as slides and obstacle courses. The Taxpayer also booked the services of disc jockeys and clowns and invoiced the charges for these services to its customers. P.D. 04-194 states:

When the Taxpayer makes rentals of its games and provides services that are directly related to the game, such services are considered services in connection with the rental of the game. The charges for these services are considered a part of the gross proceeds and are taxable in accordance with the definition of “sales price.”  When the Taxpayer provides the services of disc jockeys and clowns that are not directly related to the rental of a game, the charges for such are not taxable in accordance with the services exemption and the regulation. In order for the exemption to apply, these charges must be separately stated on the invoice from the rental charges for any property. [Emphasis added]

The Taxpayer contends that the primary purpose of the transaction is to find a disc jockey with a personality that meshes with the event and makes the event more memorable. After a customer selects the appropriate disc jockey, the Taxpayer offers other enhancements to the event, such as additional lighting or the use of a photo booth. The customer signs a single contract that includes the disc jockey service and any enhancements. Applying the true object test, the Taxpayer states that the object of the transaction is to secure the disc jockey service and the photo booth transferred to the customer is an enhancement to the service, not a critical element to the transaction.

I cannot agree with the Taxpayer that the true object of the transaction is to secure a service and that the photo booths are incidental to the transaction. The photo booths are listed as a separate line item on each contract and include a price that is often a similar price to the amount of the services provided. In addition, the Taxpayer presented contracts to the Department that include services and rentals and rentals only. This is evidence that the photo booths and other tangible personal property that are rented are separate and distinct transactions included in a single contract.

Although the disc jockey services and photo booths are meant to enhance the overall experience of a customer’s event, the photo booths and disc jockey services are not sufficiently related. The photo booths are not sold in connection with disc jockey services, but are separately stated charges that are separate and distinct from the disc jockey services provided. The photo booths are not provided as part of and do not facilitate the provision of the disc jockey services. When the Taxpayer provides the rental of the photo booth, which is not directly related to the disc jockey services, the rental is taxable while the services are exempt. The true object test does not apply to these transactions. 


Based upon this determination, the photo booths provided by the Taxpayer are a taxable equipment rental. Going forward, the Taxpayer may purchase the photo booths tax exempt using the resale exemption certificate, Form ST-10. Because the photo booth rentals are taxable, the audit will be revised to remove the tax assessed on the photo booth supply costs that were included in the assessment. 

A revised bill with interest accrued to date will be sent to the Taxpayer. No additional interest will accrue provided the outstanding assessment is paid within 30 days of the date of the bill. Please remit your payment to: Virginia Department of Taxation, 600 E. Main Street, 23rd Floor, Richmond, Virginia 23219, Attn: *****. If you have any questions concerning payment of the assessment, you may contact ***** at *****.

The Code of Virginia sections, regulation, and public document cited are available on-line at in the Laws, Rules and Decisions section of the Department’s web site. If you have any questions about this response, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.



Craig M. Burns
Tax Commissioner


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Last Updated 07/29/2020 15:40