Tax Type
Retail Sales and Use Tax
Description
Photocopy Machines
Topic
Taxability of Persons and Transactions
Date Issued
03-31-1986
March 31, 1986
Re: Request for Ruling/Sales and Use Tax
Dear ****************
This will reply to your letters of August 28 and 30, 1985, in which you request a ruling on the applicability of the sales and use tax to photocopy machines, including machines designed specifically to produce black-line tracings from blueprints.
Section 58.1-602.1 of the Code of Virginia provides an exemption from the sales and use tax for "machinery or tools or repair parts therefor or replacements thereof...used directly in...processing, (or) manufacturing...products for sale or resale." The Virginia Supreme Court, in Golden Skillet Corporation v. Commonwealth, 214 Va. 276, 199 S.E. 2d 511 (1973). held that the above statute was intended "to provide exemption for machinery and tools used in...manufacturing...products for sale or resale only in the industrial sense, 214 Va. at 278. Therefore, in order for machinery or tools to gain exemption under Virginia Code Section 58.1-608.1, two tests must be satisfied. First, the machinery or tools must be an integral part of a process in which products are manufactured for sale or resale and second, the manufacturing process must be industrial in nature.
The department has traditionally considered the operation of printing presses by a printer to be an industrial operation. Similarly, photocopy machines used by a printer in place of conventional printing presses, as opposed to those used simply to reproduce documents for the purpose of selling copies to customers, have been considered to be used in an industrial manner.
Photocopy machines which are used by a printer merely to reproduce originals for sale to customers are not considered to be used in an industrial manner, just as "quick copy centers" and photocopy machines operated by libraries, drug stores, etc., are not considered industrial, because the processing performed by such machines is purely incidental to the subsequent sale of copies at retail. This policy is supported by the Virginia Supreme Court's opinions in Golden Skillet, supra and Commonwealth v. Orange-Madison Coop, 220 Va. 655, 261 S.E.2d 532 (1980).
Based upon the foregoing, photocopy machines used by a printer are exempt from the tax only to the extent used in place of printing presses. When a single machine is used both in a taxable and exempt manner, the application of the tax must be determined by using the preponderance of use tax explained in Section 630-10-63 of the Virginia Retail Sales and Use Tax Regulations, subsection D (copy enclosed).
It should be noted that legislation has been passed by both houses of the General Assembly that would exempt "high speed electrostatic duplicators and other duplicators which have a printing capacity of 4,000 impressions or more per hour" when used in the printing or photocopying of products for sale or resale. If signed by the Governor, the exemption will take effect on July 1, 1986. It should also be noted, however, that the legislation does not extend the industrial exemption to all photocopying. Therefore, other than high speed duplicators, all machines, tools, repair parts, and supplies used in nonindustrial photocopying will remain taxable.
You also wish to determine the application of the sales and use tax to a Xerox 2080 Printer, a photocopier specially designed to convert blueprints to black-line tracings, change the scale of engineering drawings and prints, and to restore old engineering prints, sepias, and blueprints. Inasmuch as the Xerox 2080 actually creates a new product, rather than simply duplicating an original, I find that the machine is used directly in industrial manufacturing. Accordingly, the Xerox 2080 is exempt from the tax when used primarily in producing products for sale or resale.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner