Document Number
Tax Type
Retail Sales and Use Tax
Graphic design and illustration business
Taxability of Persons and Transactions
Date Issued
October 31, 1988

Re: Ruling Request/ Sales and Use Tax


This will reply to your letter of October 28, 1987 seeking information on the application of the advertising exemption to your graphic design and illustration business.

Your business provides graphic design and illustration for clients in the development of logos and trademarks, printed folders and brochures, corporate annual reports, shareholder meeting notices, public stock offerings, employee newsletters, employee benefit booklets, computer graphics, mailing envelopes and business forms, stationery and business cards, and interior and exterior signage. You ask whether the tax will apply to the provision of any of these items if actual ownership of the illustrations, photographs, mechanical art, etc., designed by your firm is transferred to clients.

You also seek information regarding notice of sales and use tax law changes, and the correct procedure for seeking a refund from the department for sales tax erroneously collected and remitted.

Many of the specific questions raised in your letter concerning the application of the advertising exemption are addressed in previous rulings of the department, copies of which are enclosed. For example, the enclosed August 5, 1987 ruling provides detailed information on the department's efforts to notify and involve as many representatives of the advertising industry as possible in the development of Virginia Regulation (VR) 630-10-3: Advertising, a copy of which is also enclosed. The enclosed January 4, May 10, and August 18, 1988 rulings provide information on the application of the tax to many of the items mentioned in your letter, such as logos, quarterly and annual reports, brochures, employee publications, envelopes, stationery, photographs, and business cards. The meaning of the term "other mode of communication", is also addressed in the August 18 ruling.

Following, we will attempt to respond to the questions raised in your letter which have not already been fully addressed by the department.


Effective July 1, 1986, the tax does not apply to charges for the provision of "advertising" which is defined to mean concept, writing, graphic design, mechanical art, photography or production supervision for use in media advertising. Virginia Code §§58.1-608(57) and 58.1-602(23). Therefore, the total charge for any of these items by an advertising business, which is defined in section 1 of VR 630-10-3 to mean "any person or group of persons providing "advertising", is not subject to the tax, whether or not such charge includes charges for one or more items of tangible personal property conveyed to the advertising businesses' client.

The regulation also defines the term "media" very broadly to include almost anything created by an advertising business for its client for dissemination to the general public.

However, based on the last sentence of Virginia Code §58.1 -602(23), all of an advertising business' purchases of tangible materials and supplies for use in providing exempt media advertising services are subject to the tax, and may not be purchased pursuant to resale certificates of exemption. (See, also section 2(B) of VR 630-10-3 for examples of taxable purchases by advertising businesses.)

To determine if a particular mode of communication developed by an advertising business qualifies for tax exemption as "media advertising", it is necessary to determine whether the communication mode is intended to convey Promotional information to the public generally.


Under this test, the design of brochures for use by a mortgage company solely to inform existing customers of the availability of direct deduction of mortgage payments would not qualify as the development of exempt media advertising, since such brochures serve a customer service/ administrative function rather than a general public promotional function. (See however, the enclosed January 4, 1988 ruling regarding public promotional brochures.)


The design and development of shareholder meeting notices and similar non-promotional informational notices which are generally not intended for public consumption, do not qualify as items of exempt media advertising. However, the design of such notices should be distinguished from the design and development of public stock offering graphics which do serve a public promotional purpose, and therefore qualify as items of exempt media advertising.


Works of art, such as illustrations, paintings, sculptures, and models, which are intended solely for use as decorations, do not perform a public promotional function, and therefore do not qualify for the advertising exemption. See, also Virginia Regulation 630-10-8.2, enclosed.


The design and development of computer graphics for use by business, industry, etc., in computer games and computer software would not qualify as items of exempt media advertising, since such graphics are not generally intended for public promotional purposes.


The total charge for the development of a corporate identity proposal is the charge for the development of exempt media advertising, whether or not the proposal is the one ultimately selected by an advertising businesses' client. In addition, the tax applies to the advertising businesses' purchases of typography, printing, supplies, etc., used in developing the proposal, regardless of the fact that the proposal may not be the one selected by its client.


As indicated in the enclosed August 18, 1988 ruling, the design of a logo, identifying symbol or slogan for use on exterior signs to promote a client's new corporate image represents the provision of an exempt media advertising service. However, such identifying signs are to be distinguished from interior or exterior signs of an informational or directional nature, which serve administrative, non-promotional functions, the design of which does not qualify for the advertising exemption.


Your proposal to require advertising businesses to tax charges for tangible items transferred to clients in connection with the provision of media advertising closely mirrors the department's pre-July 1, 1986 policy regarding sales of advertising materials. However, the proposal does not accurately reflect the department's current policy based on post-July l, 1986 sales and use tax law. The application of the tax to graphic designs, illustrations or photographs, provided by an advertising business for use in media advertising does not depend on whether actual ownership of the design, illustration or photograph is transferred to an advertising businesses' client. As indicated in the enclosed regulation, if the design, illustration or photograph is intended for use in media advertising, it will not be subject to the tax, whether or not the client obtains actual ownership of the final product.


Virginia Code §58.1 - 1823 provides that:
    • Any person filing a tax return required for any tax administered by the Department of Taxation may, within three years from the last day Prescribed by law for the timely filing of the return, ... file an amended return with the Department. If the Department is satisfied, by evidence submitted to it or otherwise, that the tax assessed and paid upon the original return exceeds the proper amount, the Department may reassess the taxpayer and order that any amount excessively paid be refunded to him. (Emphasis added)
Therefore, subject to the time limits set forth above, and after payment of the refund to its client, the taxpayer may file a refund request with the department. The taxpayer's refund request should be supported by documentation showing the amount of the refund paid to its client, the tax period(s) for which the refund is claimed, and the circumstances of the taxpayer's erroneous collection and payment of the tax. This information should be submitted to the department's Taxpayer Assistance Section, office Services Division, at P.O. Box 6-L, Richmond, Virginia 23282. of course any refund which may be issued to the taxpayer would be reduced by the amount of any dealers' discount taken at the time the tax was initially remitted to the department.

Subject to these same limitations, a client of the taxpayer may seek a refund for sales tax erroneously paid directly from the department. In addition, claims for refund may be made by either the taxpayer or its client whether the taxpayer or its client knew at the time a particular transaction was entered in to, that the transaction qualified for tax exemption.

Finally, the taxpayer should file a use tax return, (Form ST-9), directly with the department reporting the amount of tax and interest due on any previously untaxed purchases from suppliers, such as printers and typesetters, in connection with its provision of exempt media advertising services to clients.

I hope that the foregoing and the enclosed materials have answered your questions but let the department know if you have any further questions.


W. H. Forst
Tax Commissioner

Last Updated 08/25/2014 16:46