Tax Type
Retail Sales and Use Tax
Description
Professional services provided to state agency; Purchase of brochures, etc.
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
11-20-1989
November 20, 1989
Dear*********************
This is in reply to Your letter of June 2, 1989 in which you request that*********** (the Taxpayer) be advised of the proper procedure for handling sales to the Virginia Department of Personnel and Training (DPT).
Virginia Code §58.1-608(5)(a) provides a sales and use tax exemption for, "professional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made."
In addition, §630-10-97.1 of the Virginia Retail Sales and Use Tax provides in pertinent part:
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- In order to determine whether a particular transaction which involves both the rendering of a service and the provision of tangible personal property constitutes an exempt service or a taxable retail sale, the "true object" of the transaction must be examined. If the object of the transaction is to secure a service and the tangible personal property which is transferred to the customer is not critical to the transaction, then the transaction may constitute an exempt service. However, if the object of the transaction is to secure the property which it produces, then the entire charge, including services provided, will be taxable.
- In order to determine whether a particular transaction which involves both the rendering of a service and the provision of tangible personal property constitutes an exempt service or a taxable retail sale, the "true object" of the transaction must be examined. If the object of the transaction is to secure a service and the tangible personal property which is transferred to the customer is not critical to the transaction, then the transaction may constitute an exempt service. However, if the object of the transaction is to secure the property which it produces, then the entire charge, including services provided, will be taxable.
For the reasons stated above, the Taxpayer is liable for the sales and use tax on all items purchased by them in fulfilling their contractual obligations with the DPT. The sales tax on these purchases should be taken into account when billing DPT for services rendered. I have enclosed previous rulings by this department dealing with similar situations.
If you should have any further questions, please feel free to contact this department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner