Tax Type
Retail Sales and Use Tax
Description
Recording studio equipment
Topic
Taxability of Persons and Transactions
Date Issued
02-27-1987
February 27, 1987
Re: §58.1-1821 Application/Sales and Use Tax
Dear ****************
This will reply to your letter of August 22, 1986, in which you submit an application for correction of sales and use tax assessed to********* as the result of a recent audit.
FACTS
Your corporation is engaged in the operation of a recording studio and the sale of tapes and records produced as the result of recording sessions. A recent audit by the department produced an assessment for your corporation's failure to remit the sales and use tax on equipment used in its recording studio. You contest the assessment of tax on such equipment, contending that the recording studio is entitled to the industrial manufacturing exemption described in Virginia Regulation 630-10-63.
DETERMINATION
§58.1-602.9 of the Code of Virginia and Virginia Regulation 630-10-63 both provide in effect that any business classified in codes 10-14 and 20-39 of the Standard Industrial Classification (SIC) Manual will be entitled to the industrial manufacturing exemption set forth in §58.1-608.1 of the Code of Virginia.
A review of the SIC Manual in fact reveals that recording studios are classified in code 36 (industry number 3652). Therefore, all equipment, tools, and supplies used directly by your corporation in producing records and tapes for sale or resale are exempt from the sales and use tax. Based on this finding. the department will revise its audit accordingly.
In addition, I find basis in this instance for the relief of sales tax assessed to your corporation due to the failure to collect the tax from customers on services rendered in connection with sales of finished records and tapes. Although the assessment is correct under the law (see the enclosed copies of recent determinations on the subject), there has been confusion within the recording industry due to conflicting information which merits relief in this case. For the future, however, your corporation will be expected to collect the sales tax from customers based upon the total charge made for records or tapes, including charges for any services connected with the sale.
The department's audit will be revised as soon as practicable. If you have any further questions or concerns on the application of the tax to recording studios, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner