Tax Type
Retail Sales and Use Tax
Description
Newspaper publishing; Supplies and equipment used at plant site
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
06-06-1985
June 6, 1985
RE: § 58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply to your letter of March 5, 1985, on behalf of ***** (Taxpayer), protesting the assessment of sales and use tax for the period January 1, 1982, through September 30, 1984.
Facts
Taxpayer publishes a daily newspaper of general circulation in *****. Taxpayer protests the imposition of sales and use tax on certain items used in news gathering when such items are used at its plant site, based on Charlottesville Newspaper, Inc., T/A The Daily Progress v. Commonwealth of Virginia, a 1978 Charlottesville Circuit Court case (affirmed without opinion by the Supreme Court of Virginia, 4/5/79). Such items include paper rolls for wire service (AP/UPI) teletype machines, camera film and developing chemicals, proof paper, layout sheets and goldenrod masking tape. Taxpayer argues with respect to the teletype machine paper that such paper is used directly in printing the paper, since the majority of the news and pictures included in the newspaper come over the wire services.
With regard to the film, developing chemicals, and proof paper, taxpayer argues that such items are exempt since they are used at the plant site rather than in the field, pursuant to Charlottesville Newspaper, Inc.
Lastly, Taxpayer argues that its layout sheets and goldenrod are "used directly" in the actual production process of the newspaper. It is our understanding that the layout sheets and goldenrod masking tape used by taxpayer in the actual piecing together of the newspaper have previously been removed from the audit and are, therefore, no longer subject to correction herein.
Determination
§ 630-10-63 of the Virginia Sales and Use Tax Regulations provides an exemption for "tangible personal property used directly in those necessary ancillary activities of newspaper and magazine printing when such activities are performed by the publisher of any newspaper..." The Regulations then define "used directly" as, "those activities that are an integral part of the production of a product, including all steps of an integrated manufacturing process..."
The court, in the Charlottesville Newspaper, Inc. case, specifically declined to find the use of the AP/UPI teletype machine to be a part of the newspaper's manufacturing or production process. Rather, the court expressly limited its holding of exemption to the charges for the wire services received by the newspaper, and held such charges to be charges for personal services under § 58.1-608(2) of the Virginia Code (see p.'s l and 2 of the Charlottesville Circuit Court's Final Order). The issue of paper used in receiving such wire services over the teletype machine was not addressed in the Charlottesville Newspaper, Inc. case.
The teletype machine paper used in taxpayers newspaper plant, while an essential part of its production and printing process, is not an immediate part of actual production. Rather, such teletype machine and paper are used to produce items from which the end product (i.e., the newspaper) is ultimately made.
Nor would the camera film, developing chemicals, and proof paper as described qualify for the industrial production exemption. Such preproduction or premanufacturing items are used before the start of the actual printing process. Furthermore, the fact that such items were used completely in taxpayer's plant does not automatically qualify them for the industrial processing exemption, since their use by taxpayer precedes the actual layout of pages for printing.
If however, such items were used in photographing a page layout for use in making printing plates, they would be exempt from the tax. Therefore, if taxpayer can provide detailed documentation showing what, if any, percentage of such film, chemicals, and proof paper are used to develop photographs of the actual newspaper layout itself (as opposed to pictures taken in the field for inclusion in the newspaper), I will consider adjustment of the audit on this issue. Such documentation should be forwarded to the Technical Services Section, Office Services Division,
P. O. Box 6-L, Richmond, Virginia 23282, within 60 days of this letter.
Therefore, based on all of the foregoing, I find no basis at this time to adjust the audit in this case.
Sincerely,
W. H. Forst
Tax Commissioner
RE: § 58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply to your letter of March 5, 1985, on behalf of ***** (Taxpayer), protesting the assessment of sales and use tax for the period January 1, 1982, through September 30, 1984.
Facts
Taxpayer publishes a daily newspaper of general circulation in *****. Taxpayer protests the imposition of sales and use tax on certain items used in news gathering when such items are used at its plant site, based on Charlottesville Newspaper, Inc., T/A The Daily Progress v. Commonwealth of Virginia, a 1978 Charlottesville Circuit Court case (affirmed without opinion by the Supreme Court of Virginia, 4/5/79). Such items include paper rolls for wire service (AP/UPI) teletype machines, camera film and developing chemicals, proof paper, layout sheets and goldenrod masking tape. Taxpayer argues with respect to the teletype machine paper that such paper is used directly in printing the paper, since the majority of the news and pictures included in the newspaper come over the wire services.
With regard to the film, developing chemicals, and proof paper, taxpayer argues that such items are exempt since they are used at the plant site rather than in the field, pursuant to Charlottesville Newspaper, Inc.
Lastly, Taxpayer argues that its layout sheets and goldenrod are "used directly" in the actual production process of the newspaper. It is our understanding that the layout sheets and goldenrod masking tape used by taxpayer in the actual piecing together of the newspaper have previously been removed from the audit and are, therefore, no longer subject to correction herein.
Determination
§ 630-10-63 of the Virginia Sales and Use Tax Regulations provides an exemption for "tangible personal property used directly in those necessary ancillary activities of newspaper and magazine printing when such activities are performed by the publisher of any newspaper..." The Regulations then define "used directly" as, "those activities that are an integral part of the production of a product, including all steps of an integrated manufacturing process..."
The court, in the Charlottesville Newspaper, Inc. case, specifically declined to find the use of the AP/UPI teletype machine to be a part of the newspaper's manufacturing or production process. Rather, the court expressly limited its holding of exemption to the charges for the wire services received by the newspaper, and held such charges to be charges for personal services under § 58.1-608(2) of the Virginia Code (see p.'s l and 2 of the Charlottesville Circuit Court's Final Order). The issue of paper used in receiving such wire services over the teletype machine was not addressed in the Charlottesville Newspaper, Inc. case.
The teletype machine paper used in taxpayers newspaper plant, while an essential part of its production and printing process, is not an immediate part of actual production. Rather, such teletype machine and paper are used to produce items from which the end product (i.e., the newspaper) is ultimately made.
Nor would the camera film, developing chemicals, and proof paper as described qualify for the industrial production exemption. Such preproduction or premanufacturing items are used before the start of the actual printing process. Furthermore, the fact that such items were used completely in taxpayer's plant does not automatically qualify them for the industrial processing exemption, since their use by taxpayer precedes the actual layout of pages for printing.
If however, such items were used in photographing a page layout for use in making printing plates, they would be exempt from the tax. Therefore, if taxpayer can provide detailed documentation showing what, if any, percentage of such film, chemicals, and proof paper are used to develop photographs of the actual newspaper layout itself (as opposed to pictures taken in the field for inclusion in the newspaper), I will consider adjustment of the audit on this issue. Such documentation should be forwarded to the Technical Services Section, Office Services Division,
P. O. Box 6-L, Richmond, Virginia 23282, within 60 days of this letter.
Therefore, based on all of the foregoing, I find no basis at this time to adjust the audit in this case.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner