Tax Type
Retail Sales and Use Tax
Description
Videotape production transactions
Topic
Taxability of Persons and Transactions
Date Issued
10-31-1984
October 31, 1984
Re: Request for Ruling/Sales and Use Tax
Dear *********
This will reply to your letter of October 3, 1984, in which you submit request for ruling on the applicability of the sales and use tax to various aspects of the operations of *****.
§ 58-441.4 of the Code of Virginia imposes the sales tax upon "the sales price of each item or article of tangible personal property when sold at retail or distributed in this State." The term "sales price" is defined in Virginia Code § 58-441.3(b) as "the total amount for which tangible personal property or services are sold, including any services that are a part of the sale ... without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any other expenses whatsoever." Therefore, the total charge for the production of tangible personal property should be subject to the sales tax.
The deduction from "sales price" in Virginia Code § 58-441.3(b) and Retail Sales and Use Tax Regulation 1-97.1 for "the amount separately charged for labor or services rendered in installing, applying, or remodeling or repairing property sold" is not available to a business such as ***** inasmuch as the property sold is not installed, applied, remodeled or repaired.
Furthermore, the exemption for manufacturers found in Virginia Code § 58-441.6 and Retail Sales and Use Tax Regulation 1-63 is not applicable to ***** either. The Virginia Supreme Court held in Golden Skillet Corporation v. Commonwealth, 214 Va. 276, 1999 S.E. 2d 511 (1973), that the exemption was available only to manufacturers or processors of products for sale or resale "in the industrial sense." The department has traditionally considered videotape production of the type conducted by ***** to be non-industrial. This policy has been strengthened by a 1983 law change in which the General Assembly revised Virginia Code § 58-441.3(p) to provide that the term "industrial in nature" shall include, but not be limited to, those businesses classified in codes 10 through 14 and 20 through 39 published in the Standard Industrial Classification Manual." A review of that manual reveals that an operation such as ***** is not included in those codes, but rather is included in Code 73 of the manual.
Based upon the foregoing, ***** should collect the sales and use tax from its customers based upon the total charge for property sold, including services rendered in producing the property, unless the sale is one for resale. In your letter, you wished to determine the correct procedure of computing the tax on various transactions. The correct procedures are set forth below:
(1) Contract Work to Retailers. When movies are converted to videotapes for ultimate resale by movie rental businesses, the total transaction is exempt from tax when a resale exemption certificate is presented to ***** by the purchaser.
(2) Conversion of Home Movies for the Consumer. When home movies are converted to videotape for consumers, the entire charge, including tape, services, labor, and other overhead charges included in the total charge, is subject to tax.
(3) Conversion of Films for Businesses or Consumers. The tax applies in the same manner as in (2) above when training films, conference films, sports films, etc., are converted to videotapes.
(4) Conversion of Videotape Formats. When television commercials, recorded on 3/4 inch tape, are converted to 1/2 inch tape for viewing on video cassette recorders, the tax applies to the total charge for the finished tape, including the tape itself and all other components of the total charge (labor, etc.).
(5) Videotaping of Special Events. Again, the total charge for the videotaping of special events is subject to the tax, including charges for tape, labor, etc.
(6) Conversion of Photographs and Slides to Videotape. The tax applies to the total charge for converting photographs and slides to videotapes, including charges for tape, tinting, labor, etc.
I hope that this answers all of your questions. Please feel free to contact the department if further information is needed with respect to the applicability of the tax to these or other transactions.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner