June 27, 2025
Re: Ruling Request: Retail Sales & Use Tax
Dear ***** :
This letter is in reply to your request for a ruling on behalf of your client, (the “Taxpayer”), regarding the Virginia retail sales and use tax treatment of its advertising and direct mail advertising services.
This ruling is based on the facts presented as summarized below. Any change in facts or the introduction of new facts may lead to a different result.
FACTS
The Taxpayer, an out-of-state business engaged in advertising services, develops and creates direct mail materials based on data provided by its customers. The Taxpayer uses out-of-state vendors to print and perform the postcard and letter distribution through the United States Postal Service. The Taxpayer requests guidance as to whether its advertising services and direct mail marketing materials mailed to consumers in Virginia are subject to the Virginia retail sales and use tax.
RULING
Strict Construction of Exemptions
The Department has the authority to interpret and enforce the laws of the Commonwealth governing taxes in accordance with Virginia Code § 58.1-203. With regard to such interpretations, the settled caselaw requires strict construction of sales and use tax exemptions. Where there is any doubt as to the application of an exemption, the doubt is resolved against the one claiming the exemption. See Commonwealth v. Community MotorBus, 214 Va. 155 (1973); Commonwealth v. Research Analysis Corporation, 214 Va. 161 (1973); and Golden Skillet Corp. v. Commonwealth, 214 Va. 276 (1973).
Advertising
Virginia Code § 58.1-609.6 5 states that the retail sales and use tax shall not apply to advertising. Virginia Code § 58.1-602 defines advertising as:
[T]he 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. Any person providing advertising as defined in this section shall be deemed to be the user or consumer of all tangible personal property purchased for use in such advertising.
Title 23 of the Virginia Administrative Code (VAC) 10-210-40 defines “media” as “newspapers, magazines, billboards, direct mail, radio, television, and other modes of communication. In addition, Title 23 VAC 10-210-41 A provides:
The tax does not apply to charges by an advertising business for professional services in the planning, creating or placing of advertising in newspapers, magazines, billboards, direct mail, radio, television, or other media regardless of how such charges are computed by the advertising business and whether or not such business actually places the advertising in the media.
Based on the description of the Taxpayer’s advertising services, transactions for such services would not be subject to Virginia sales tax.
Virginia Code § 58.1-602 and Title 23 VAC 10-210-41 B deem advertising businesses to be the user or consumer of all tangible personal property purchased for use in such advertising. Title 23 VAC 10-210-41 B states that the use tax specifically applies to the purchase of tangible personal property used in “printing, including direct mail items, non-customized or stock mailing lists, handbills, brochures, flyers, bumper stickers, posters and similar printed materials.” Therefore, the purchase of any tangible personal property used to create and develop direct print materials is generally subject to use tax.
However, an advertiser is only subject to the Virginia use tax as authorized by Virginia Code § 58.1-604, which requires use to occur within Virginia. Based on the facts provided, the Taxpayer, its facilities, and its third-party vendor are all located out of state. Based on the facts provided, the Taxpayer would not be subject to use tax on tangible personal property purchased to create the advertising since such property would not be used in Virginia. See P.D. 10-72 (5/18/2010).
Advertising Postcards
The Taxpayer states that the final product mailed to end consumers is a postcard or letter advertising products or services. The Taxpayer’s direct mail services are performed by a third-party vendor located outside of Virginia. The Taxpayer cites P.D. 09-3 (2/4/2009) to support its analysis that its direct mail advertising in interstate commerce is non-taxable. In P.D. 09-3, a marketing business used the United States Postal Service to deliver direct mail advertisements to Virginia residents on behalf of its customers. Because title of the mailers passed to customers outside Virginia, the Department concluded the transactions were not subject to Virginia sales and use tax. Consistent with Title 23 VAC 10-210-780 A, the Department ruled that, because title and possession of tangible personal property (e.g., direct mail materials) took place outside of Virginia and no use was made in Virginia, the sales were deemed interstate commerce and not taxable. However, P.D. 09-3 is not directly applicable to the facts provided by the Taxpayer because a third party, rather than the Taxpayer, prints and posts the mailers.
In this case, the Taxpayer is providing advertising services and contracts with third-party vendors who print and ship direct mail advertising. As stated above, advertising businesses are deemed to be the user or consumer of all tangible personal property purchased for use in such advertising. See Virginia Code § 58.1-602 and Title 23 VAC 10-210-41 B. However, the Taxpayer would only be subject to Virginia use tax as authorized by Virginia Code § 58.1-604, which requires use to occur within Virginia. See P.D. 10-73. Based on the facts presented by the Taxpayer, it conducts advertising activities from outside Virginia and contracts with a third-party vendor that prints and mails the materials from outside of Virginia. Therefore, the Taxpayer would not be subject to Virginia use tax on the tangible personal property used in providing such services.
The Code of Virginia sections and regulations cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If you have any questions regarding this ruling, you may contact ***** in the Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at ***** or *****.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR/4342.F