Tax Type
Retail Sales and Use Tax
Description
Industrial Materials; Photo Processing
Topic
Taxability of Persons and Transactions
Date Issued
07-22-1991
July 22, 1991
Re: § 58.1-1821 Application: Sales and Use Tax
Dear*****************
This will reply to your protective claim for refund dated February 2, 1990 on behalf of your client,****(the "Taxpayer"). Pursuant to Va. Code § 58.1-1824, this claim is being decided on its merits and has been processed as an administrative appeal under the provisions of Va. Code § 58.1-1821.
FACTS
The taxpayer is a retailer selling cameras, film, optical products, etc., and offers photo processing services at each of its retail locations. Retail sales operations and photo processing operations are at each store location.
The taxpayer contends that the retail sales of cameras, etc., and photo processing operations are organized as two distinct business operations within the corporation. The taxpayer also states that separate costs and revenue centers are assigned to each business segment, and that separate financial statements are prepared for each segment.
As such, the taxpayer believes that the photo processing equipment is a separate processing operation, as opposed to an ancillary operation to the retail sales of cameras, film, and other optical equipment. Therefore, the taxpayer believes it is entitled to the industrial manufacturing exemption with respect to purchases of photo processing equipment.
DETERMINATION
The department has traditionally deemed photo processing that is performed as an incidental part of the operation of a photography studio or camera shop to be nonindustrial in nature based upon the opinions of the Virginia Supreme Court in Golden Skillet v. Commonwealth, 214 Va. 276, 199 S.E.2d 511 (1973) and Commonwealth v. Orange-Madison Coop., 220 Va. 655, 261 S.E. 2d 532 (1980). (See P.D. 89-320, copy enclosed.)
While the taxpayer, in the instant case, performs separate accounting for the retail sales and photo processing operations, the photo operation is not separate from the retail operation, i.e., a customer will purchase the photo processing services from the taxpayer's retail operation, as opposed to purchasing them directly from the photo processing operation. Accordingly, the photo processing operations are deemed to be an incidental part of the taxpayer's retail business and not entitled to the industrial manufacturing exemption under Va. Code § 58.1-608(3)(b).
Therefore, based upon the facts presented, I find no basis for correcting the contested assessment and granting your claim for refund.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner