Tax Type
Retail Sales and Use Tax
Description
Telephones used by news reporters
Topic
Taxability of Persons and Transactions
Date Issued
09-21-1989
September 21, 1989
Re: Ruling Request/Sales and Use Tax
Dear*************
This is in reply to your letter of August 3, 1989 in which you request a ruling on the sales tax exemption for telephone equipment purchased by**********(hereinafter taxpayer).
FACTS
The taxpayer recently purchased a telephone system which includes 257 telephones and related control equipment. Of the 257 telephones, 117 are used for news gathering. The telephones for which you seek exemption are those which are located in the newsroom and used by reporters and staff members to obtain news items to be published. Some of the telephones in question are used in the production area of the newspaper for communication to the newsroom and other areas, both inside the building and outside.
RULING
§58.1-608(3)(b) of the Code of Virginia exempts from the sales and use tax equipment, materials or supplies used directly in the production of a publication issued at regular intervals not exceeding three months.
The term "used directly" is defined in §630-10-63(B)(2) of the Virginia Retail Sales and Use Tax Regulations as "those activities that are an integral part of the production of a product, including all steps of an integrated manufacturing process, but not including incidental activities such as general maintenance, management, and administration." The regulation also notes that "[i]tems of tangible personal property which are used directly in manufacturing... are... (those) which are indispensable to the actual production of products for sale and which are used as an immediate part of such production process. Convenient or facilitative items... or items which are essential to the operation of a business but not an immediate part of actual production are not used directly in manufacturing." Emphasis added.
While we recognize the fact that the telephones in this case are an essential part of the production and printing process, they are not an immediate part of the actual production of the newspaper. The telephones in question are used by the reporters to assist them in obtaining information to write news articles for incorporation into the newspapers. As such, the telephones are used prior to the actual production process, i.e., the printing of the newspapers.
Telephones used by the employees in the production area are also not an integral part of the actual production process. The telephones would be considered a part of the administration function as described in §630-10-63(C)(1) of the Regulations as follows:
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- "Administration" is the managerial, sales, and nonoperational aspects of manufacturing and processing operations and includes management, selling and marketing, employee comfort and convenience, and record keeping. Tangible personal property used in administration is subject to the tax. ...
- "Administration" is the managerial, sales, and nonoperational aspects of manufacturing and processing operations and includes management, selling and marketing, employee comfort and convenience, and record keeping. Tangible personal property used in administration is subject to the tax. ...
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner