91-126 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Catalogs; Percentage within Virginia; Mail order retailer

Topic

Exemptions

Property Subject to Tax

Date Issued

07-22-1991

July 22, 1991

Re: Request for Ruling: Sales and Use Tax

Dear*****************

This will reply to your letters of April 9, 1991 in which you request a ruling as to the correct sales and use tax application to certain printed material purchased by your client, *************(the "Taxpayer"), and also a refund claim of overpaid taxes on the same.

FACTS

The Taxpayer is a mail order retailer located in Virginia. As part of its operations, the Taxpayer purchases catalogs which are then distributed to its customers and potential customers, both within and outside Virginia. Most of the catalogs purchased by the Taxpayer are mailed by the catalog supplier directly to persons on the Taxpayer's mailing list, both within and outside Virginia (the "direct-mail catalogs"). Additional catalogs are delivered directly to the Taxpayer at its Virginia location. These catalogs are inserted in orders being filled for purchasers within and outside Virginia (the "bounce-back catalogs"). The "bounce-back catalogs" are completely distributed within 60 to 90 days after the Taxpayer receives them at their Virginia location.

The Taxpayer has been paying Virginia sales tax, at the time of purchase, on all catalogs mailed directly to Virginia customers, and on the entire amount of "bounce-back catalogs" delivered to its Virginia location. The Taxpayer has reviewed its distribution process and has discovered that approximately 2.5% of its total catalogs purchased are distributed to Virginia customers.

The Taxpayer is requesting a ruling to allow them to purchase 100% of their catalogs under a certificate of exemption (Form ST-10A), and remit the use tax on the percentage (2.5%) of those catalogs distributed to Virginia customers. In addition, the Taxpayer is requesting a refund for taxes overpaid for the period of January, 1988 through December, 1990.

RULING

Va. Code §58.1-608(6)(d) provides a sales and use tax exemption for the following:

- Catalogs, letters, brochures, reports, and similar printed materials, except administrative supplies, the envelopes, containers and labels used for packaging and mailing same, and paper furnished to a printer for fabrication into such printed materials, when stored for twelve months or less in the Commonwealth and distributed for use without the Commonwealth. As used in this subdivision, "administrative supplies" shall include, but not be limited to, letterhead, envelopes, and other stationery, invoices, billing forms, payroll forms, price lists, time cards, computer cards, and similar supplies.

Based on the above and the information provided this office, the "bounce-back catalogs" which are stored in Virginia for twelve months or less for subsequent delivery outside the state would be exempt from the Virginia sales and use tax. However, those catalogs delivered outside the state of Virginia would possibly be subject to the tax at the point of destination. Therefore, it will be necessary to furnish to the department a list of those states to which the Taxpayer delivers catalogs, along with the percentage of catalogs delivered. Upon verification of the above by a representative from the department, the appropriate refund will be authorized.

In addition, assuming that the percentages of catalogs purchased by the Taxpayer for distribution to Virginia customers is correct, I find basis for allowing the Taxpayer to purchase all catalogs exempt under Form ST-10A, and to submit the Virginia use tax based upon the number of catalogs shipped to Virginia addresses. In the event that it is administratively impractical to determine the exact number of Virginia customers, the Taxpayer may submit Virginia use tax on the established percentage of catalogs delivered to Virginia customers. It should be noted further that this ruling will not bind the department in any future audits should the number of catalogs delivered to Virginia customers change.

A representative from the department will contact the Taxpayer as soon as possible.

Sincerely,

W. H. Forst
Tax Commissioner

Rulings of the Tax Commissioner