Tax Type
Retail Sales and Use Tax
Description
Out-of-state mail order business
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
08-04-1989
August 4, 1989
Re: Ruling Request/ Sales and Use Tax
Dear**********************
This will reply to your letter of May 4, 1989 seeking a ruling on the proposed manner of operations of two as yet nonexistent corporations.
FACTS
Corporation X (X) will be a nonresident corporation owned 100% by Father, and engaged in making nationwide catalog order sales of Christmas cards and other items. X will employ no agents, salesmen, or other individuals in Virginia, and will maintain no inventory, warehouse, offices, sales house, distribution center, or facilities of any nature in this State. X will have its catalogs printed entirely outside Virginia for mailing to Virginia residents from outside the State. All goods ordered by its Virginia customers will either be shipped by common carrier or U.S. mail.
Corporation Y (Y) will be a nonresident corporation, owned jointly by Father and four children of Father, and engaged in the development and printing of messages for use on stationery for sale at wholesale. Most of Y's customers will be retailers purchasing exempt of the tax for resale. None of X's household customers will be able to purchase any merchandise directly from Y. However, X may purchase certain items from Y at an arms-length price for resale. Y will also perform contract printing of brochures, provide envelope conversion, imprinting of specialty items such as mugs, and sell picture frames and posters. Y will market and sell its products using independent sales representatives who will solicit customers for Y in Virginia.
You seek a ruling that: ( 1 ) X will not be subject to Virginia's sales tax registration and reporting requirements; and (2) if X and Y were instead operated as a single corporation or in an affiliated group of corporations, (e.g., parent-subsidiary or holding company-subsidiaries), it would be subject to such registration and reporting requirements.
RULING
Based on the facts presented, and assuming X does not: (1) advertise in newspapers or other periodicals printed and published in this State, on billboards or posters located in this State, or through materials distributed in this State by means other than the United States mail; or (2) make more than twelve deliveries of goods sold in this state during a calendar year by means other than common carrier, X will not be subject to sales and use tax registration and reporting requirements under current law. (See §§630-10-29.1 and 630-10-51 of the Virginia Retail Sales and Use Tax Regulations, enclosed). However, as you know, legislation is currently pending in Congress, (H.R. 2230), which would have the effect of overturning the United States Supreme Court opinion in National Bellas Hess, Inc. v. Department of Revenue, 386 U.S. 753 (1967), and which would require mail order retailers to collect and remit any applicable state sales taxes in making sales to customers. If H.R. 2230 becomes law, Virginia would require catalog retailers such as X to collect and remit Virginia sales tax when making sales to Virginia customers.
In addition, if X and Y were instead operated as a single corporation or as affiliated corporations, such a corporation or group of corporations would be subject to Virginia's sales and use tax registration and reporting requirements, in accordance with Virginia Code §58.1-612(C)(1)&(2), copy enclosed.
I hope that the foregoing has responded to your questions, but let the department know if you have any further questions.
Sincerely,
W.H. Forst
Tax Commissioner
Rulings of the Tax Commissioner