Tax Type
Retail Sales and Use Tax
Description
Production of annual reports; Advertising firm
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
02-27-1987
February 27, 1987
Re: Ruling Request/ Sales and Use Tax
Dear *****************
This will reply to your letter of October 2, 1986 seeking information on the correct application of the sales and use tax to charges by an advertising business in the production of annual reports for ********** (Taxpayer).
FACTS
Specifically, the taxpayer seeks a ruling whether charges by an advertising business for design, creative and production services, typography, printing, photography, model's fees, photostats and miscellaneous items in the production of annual reports, qualify for exemption from the tax as charges for the production of "advertising" under §58.1-608(57) of the Virginia Code.
RULING
Effective July 1, 1986, the tax does not apply to "advertising" which is defined in §58.1-602(23) of the Code as, "the planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting or other media, including without limitation, the providing of concept, writing, graphic design, mechanical art, photography and production supervision. Any person providing advertising as defined herein shall be deemed to be the user or consumer of all tangible personal property purchased for use in such advertising."
As a result of this law change, the Department has recently revised §630-10-3 of the Retail Sales and Use Tax Regulations, a copy of which is enclosed.
Subsection 1 of the enclosed regulation defines "media" to mean, "newspapers, magazines, billboards, direct mail, radio, television, and other modes of communication." Inasmuch as annual reports are used by corporations to communicate significant financial and other information to shareholders, interested persons and the general public, such reports qualify as "media" within the definition stated above. Therefore, an advertising businesses charges in the production of annual reports qualify for exemption from the tax.
It should be noted however, that all purchases by an advertising business of items such as printing, non-customized or stock mailing lists, etc., used in connection with the production of annual reports and any other media advertising are subject to the tax in accord with the last sentence of Virginia Code §58.1-602(23). (See also subsection 2(B) of the enclosed regulation).
I hope the foregoing has responded to your question but please let me know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner