Tax Type
Retail Sales and Use Tax
Description
Sales price; Advertising charges
Topic
Taxability of Persons and Transactions
Date Issued
06-12-1985
June 12, 1985
Re: Request for Ruling/Sales and Use Tax
Dear ****
This will reply to your letter of May 10, 1985, in which you request confirmation of your understanding of Section 630-10-3 of the Virginia Retail Sales and Use Tax Regulations relating to advertising.
Regulation 630-10-3 took effect on June 1, 1985, and will remain effective through June 30, 1986. Under the regulation, supplies and equipment used or consumed in the production of advertising are subject to the tax at the time of purchase. Only those items which actually pass to the customer may be purchased under Resale Exemption Certificates. Therefore, an item that is used in the production of an advertisement, but that does not become an actual part of the end product provided to the customer is subject to the tax.
The regulation also provides that the total charge made by an advertising agency to a customer for the production of tangible personal property is subject to the tax. This is based upon the provisions of Virginia Code Section 58.1-602.17, which defines the term "sales price," upon which the sales tax is based, 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, charges made to customer for staff time, talent, photography, materials and services, agency profit, incidental expenses such as travel, telephone calls, and copying, and shipping, delivery or freight charges are taxable when made in conjunction with the production of an advertisement for sale. Charges for transporting a finished advertisement to a customer are nontaxable when separately stated on the customer's invoice under the specific provisions of Virginia Code Section 58.1-602.17.
Charges made to customers that are not in connection with a sale of tangible personal property are not subject to the tax. Such charges may include fees for research not related to a specific advertisement, public relations services, media planning and analysis, account planning and administration, agency profit on nontaxable service transactions, and miscellaneous charges such as travel, telephone calls, and copying. It should be noted, however, that any of these charges are taxable when provided in connection with the sale of an advertisement. For instance, if a customer contracts for the production of an advertisement and in connection therewith is provided with a market research study, the total charge for both is taxable. Charges made to advertising agencies for the placement of an advertisement on behalf of a customer are exempt from the tax when passed on to the customer as a separately stated item on the customer's invoice.
I trust that this will clarify the application of the sales and use tax to your agency. Please feel free to contact the department if you have any other questions.
Sincerely,
W. H. Forst
Tax Commissioner
Re: Request for Ruling/Sales and Use Tax
Dear ****
This will reply to your letter of May 10, 1985, in which you request confirmation of your understanding of Section 630-10-3 of the Virginia Retail Sales and Use Tax Regulations relating to advertising.
Regulation 630-10-3 took effect on June 1, 1985, and will remain effective through June 30, 1986. Under the regulation, supplies and equipment used or consumed in the production of advertising are subject to the tax at the time of purchase. Only those items which actually pass to the customer may be purchased under Resale Exemption Certificates. Therefore, an item that is used in the production of an advertisement, but that does not become an actual part of the end product provided to the customer is subject to the tax.
The regulation also provides that the total charge made by an advertising agency to a customer for the production of tangible personal property is subject to the tax. This is based upon the provisions of Virginia Code Section 58.1-602.17, which defines the term "sales price," upon which the sales tax is based, 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, charges made to customer for staff time, talent, photography, materials and services, agency profit, incidental expenses such as travel, telephone calls, and copying, and shipping, delivery or freight charges are taxable when made in conjunction with the production of an advertisement for sale. Charges for transporting a finished advertisement to a customer are nontaxable when separately stated on the customer's invoice under the specific provisions of Virginia Code Section 58.1-602.17.
Charges made to customers that are not in connection with a sale of tangible personal property are not subject to the tax. Such charges may include fees for research not related to a specific advertisement, public relations services, media planning and analysis, account planning and administration, agency profit on nontaxable service transactions, and miscellaneous charges such as travel, telephone calls, and copying. It should be noted, however, that any of these charges are taxable when provided in connection with the sale of an advertisement. For instance, if a customer contracts for the production of an advertisement and in connection therewith is provided with a market research study, the total charge for both is taxable. Charges made to advertising agencies for the placement of an advertisement on behalf of a customer are exempt from the tax when passed on to the customer as a separately stated item on the customer's invoice.
I trust that this will clarify the application of the sales and use tax to your agency. Please feel free to contact the department if you have any other questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner