Tax Type
Retail Sales and Use Tax
Description
Services; Computer Animation
Topic
Taxability of Persons and Transactions
Date Issued
06-28-1991
June 28, 1991
Re: Request for Ruling: Retail Sales and Use Tax
Dear*****************
This will reply to your letter of February 2, 1991 in which you request a ruling on the applicability of the sales and use tax to certain transactions engaged in by*************(the "Taxpayer").
FACTS
The Taxpayer recently expanded its business to include computer animation for videos. New equipment purchased enables it to hook its computer to a videotape machine and record its animations. It, however, does not have a videotape machine. The Taxpayer requests a ruling on the taxability of various transactions within which it may engage.
DETERMINATION
Va. Code §58.1-608(5)(a) provides an exemption from the retail sales and use tax for:
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- [p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made, nor services rendered by repairmen for which a separate charge is made.
Thus, the provision of computer animations for another business when no tangible personal property is transferred would qualify as an exempt professional service. However, when tangible personal property is transferred, as in the case of your paying someone to make a video of your work for subsequent resale to a client, the taxability of the transaction will depend on its intended use. If the video is for use in media advertising, it would be nontaxable. However, if it is for a non-media purpose (such as an in-house training film), the total charge for the production of the video, not just the charge for the tape, would be taxable. See the enclosed ruling letter, P.D. 89-332 (11/21/89), regarding the taxability of media and non-media advertising and sales to advertising agencies.
A computer-animated presentation provided for a client by directly plugging a computer into a projector would also be exempt as a professional service. However, if the presentation is copied onto a video tape for sale to a customer, the taxability would depend on its intended use as explained above.
Please note that the department is currently in the process of revising its regulation relating to advertising. We will include you on our mailing list to receive information concerning any proposed changes to the regulation during the revision process.
Please contact the department if you have any further questions regarding this matter.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner