Tax Type
Retail Sales and Use Tax
Description
Photocopiers used by a commercial photocopy business
Topic
Taxability of Persons and Transactions
Date Issued
09-11-1989
September 11, 1989
Re: Ruling Request/ Sales and Use Tax
Dear***************
This will reply to your letter of February 23, 1989 seeking a ruling on the application of the sales and use tax to equipment used by ********** (taxpayer), a commercial photocopy business.
FACTS
In addition to photocopy services, the taxpayer provides typesetting, binding and other services in the reproduction and publishing of printed matter. Ancillary to its main business, the taxpayer also makes photocopy equipment available to the public at large on a "walk-in" basis. In connection with its business, the taxpayer leases a Xerox 1065 copier primarily to back up its Xerox 9900, a high speed electrostatic duplicator which qualifies for tax exemption under Virginia Code §58.1-608(64), when the 9900 is temporarily overburdened or inoperable. The Xerox 1065 can also convert blueprints to black line drawings; accommodate originals of up to 11 x 17 inches; change the scale of engineering drawings, prints and other originals; and restore old engineering prints, sepias and blueprints.
While you admit that the Xerox 1065 does not qualify for the high speed electrostatic duplicator exemption, you seek a ruling that it qualifies for the industrial manufacturing exemption in a manner similar to a machine exempted in a March 31, 1986 ruling of the department.
RULING
Virginia Code §58.1-608(1) exempts from the sales and use tax, "machinery, or tools or repair parts therefor or replacements thereof...used directly in...manufacturing...products for sale or resale." The Virginia Supreme Court has interpreted this exemption to apply to, "machinery and tools used in...manufacturing of products for sale or resale only in the industrial sense." (See, Golden Skillet Corporation v. Commonwealth, 214 Va. 276,199 S.E. 2d 511 (1973)). For purposes of the manufacturing exemption, the term "industrial in nature" is defined in Virginia Code §58.1-602(9) to include, "those businesses classified in codes 10 through 14 and 20 through 39 published in the Standard Industrial Classification [SIC] Manual."
The SIC Manual classifies commercial photocopy businesses such as the taxpayer's as non-industrial "business services". (See, SIC Manual, 1987 ed., Code 7334, enclosed). In addition, the department's March 31, 1986 ruling cited in support of this exemption request, cannot be analogized to the facts of this case, since that ruling concerned the purchase of a copier by a commercial printer which is classified in the SIC Manual as an industrial manufacturing business. (See SIC Manual, 1987 ed., Codes 2752 2759, enclosed).
Based on the specific statutory language cited above, and the strict construction of all exempting statutes long accepted by the Virginia courts, I cannot agree to an extension of the manufacturing exemption to the taxpayer's Xerox 1065 copier. For your further information, I have enclosed a copy of the department's 1986 legislative impact statement for Senate Bill 164 which created the high speed electrostatic duplicator exemption.
I hope that the foregoing, and the enclosed materials, have responded to your question, but let me know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner