Tax Type
Retail Sales and Use Tax
Description
Membership fees at a video tape rental club
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
07-03-1984
- July 3, 1984
Re: Ruling Request: Sales and Use Tax
Dear *****************
This will reply to your letter of March 19, 1984 concerning applicability of Virginia retail sales and use tax to membership fees in a video tape rental club.
FACTS
***** (the "Company") is a video club which has memberships available for periods of six months, one year or life. Only members are eligible to rent tapes from the Company but whether a particular member will be permitted to rent depends on other factors such as the member's payment and return history and rules of the Company concerning care of the tapes or discs. Members receive a newsletter advising of new movies, and can buy tapes, discs and special merchandise at a discount. Membership does not include any free rentals, discount on rentals or other benefits. A member is not obligated to rent or to pay any minimum or maximum rental and the Company has members who continue to renew their memberships even though they have not rented for a year or more.
A member receives a membership card which gives him access to the Company for rental if he otherwise qualifies. He can buy a membership card for ***** for use by a family member to enter the Company. The Company imposes sales tax on the ***** charge, on rental fees and, in the case of a member who does not return the tape or disc, the value of the tape or disc (assuming the Company can collect the value).
Determination
§ 58-441.4 of the Code of Virginia imposes a tax on the sale of tangible personal property in Virginia. "Sale" is defined as any transfer of title or possession of tangible personal property and any rendition of a taxable service for a consideration (Va. Code §58-441.2(b)). Based the foregoing facts, the memberships offered by the Company fit neither criteria of the definition of "sales." Accordingly, the Company's membership fees, when separately stated, are not subject to the sales and use tax. Similarly, the extra membership card, which merely grants a family member access to the Company, is not subject to sales tax. However, as you acknowledge in your letter, the sale or rental of tapes, discs and merchandise, and the collection of the value of an unreturned tape or disc is subject to sales tax. In addition, the Company must pay use tax on the cost of the membership card and any other materials of which it is the consumer.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner