Tax Type
Retail Sales and Use Tax
Description
Photographer
Topic
Taxability of Persons and Transactions
Date Issued
03-30-1987
March 30, 1987
Re: Request for Ruling/Sales and Use Tax
Dear ********************
This will reply to your recent letter, in which you wish to determine the application of the sales tax to certain charges for products or services provided by your business.
Although you may not be engaged in business as a photographer per se, the application of the sales tax to your business activities is set forth in Virginia Regulation 630-10-82, which deals with the sale of photographs, photostats, blueprints, etc. I have enclosed a copy of the regulation for your review.
In addition, the application of the tax to activities that resemble those of an audio or video recording studio are set forth in recent determinations dated October 24, 1984 and July 31, 1986. Copies of these determinations are enclosed for your review.
Based on VR 630-10-82 and my recent determinations regarding recording studios, the sales tax will apply when your company produces and sells a tangible product, such as copies of a film or a photograph. The tax should be computed on the "sales price" of the product, i.e., the total charge made to the customer for the product, including any services that are a part of the sale. Charges included in the taxable sales price of an item might include charges for labor, overtime, special effects or animation, mixing of recordings, record narration, editing, developing films, packaging, facilities rental, etc.
However, when your company does not produce and sell a tangible product and is merely providing a service, the charges will not be subject to the sales tax. For instance, fees for the use of
facilities (screening rooms, editorial rooms, etc.) would be nontaxable when made independent of the sale of a product. Also, VR 630-10-82 exempts charges for the developing of film and the coloring or tinting of film when such charges are independent of the sale of a product. Similarly, charges for services such as edgenumbering, mixing recordings, narration for recordings, etc. would not be taxable if made separate from a sale.
Thus, you will see that the application of the tax to the various charges made by your company depends on whether the charges are in connection with the sale of tangible products. If they are, then the tax applies; however, if the charges represent the provision of a service independent from the sale of a product, the tax does not apply.
In addition, I would like to point out that the §58.1-608.57 of the Code of Virginia exemption for "media advertising" may apply to the charges made by your firm for the production of commercial advertisements for television or other media. Specifically exempted are charges for "the providing of concept, writing, graphic design, mechanical art, photography and production supervision." To assist you, I have enclosed a copy of Virginia Regulation 630-10-3, which describes the media advertising exemption.
Lastly, I would note that the industrial manufacturing exemption set forth in §58.1-608.1 of the Code of Virginia may apply to certain activities of your business. As noted in Virginia Regulation 630-10-63 (copy enclosed), the exemption applies only to machinery, tools, repair parts and replacements for exempt machinery and tools, fuel, power, energy, and supplies used directly in industrial activities that result in the production of products for sale or resale.
In previous rulings, I have concluded that the operation of a commercial photo development laboratory entitles one to the industrial exemption, provided that the business does not sell film at retail. In addition, I have held that the operation of an audio recording studio producing master tapes and finished records and tapes qualifies for the industrial exemption. However, the production of audiovisual devices, training films, etc. has been deemed nonindustrial in nature and does not qualify for the exemption. Similarly, the production of advertising films, tapes, etc. would not qualify for the exemption.
I trust that this will answer your questions, however, please do not hesitate to contact the department if further questions arise.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner