Tax Type
Retail Sales and Use Tax
Description
Publications; Homes for Sale Advertising Magazine
Topic
Taxability of Persons and Transactions
Date Issued
03-11-1991
March 11, 1991
Re: Request for Ruling: Sales and Use Tax
Dear*****************
This will reply to your letter of January 11, 1989 in which you request a ruling on the applicability of the sales and use tax to printing charges for a magazine which you publish.
FACTS
**********(the "Taxpayer") publishes a "shopper" magazine containing advertisements for homes for sale. The magazine is published every four weeks and is distributed free of charge to the public. The magazine is typeset, designed, and printed in another state and shipped to Virginia for distribution. The Taxpayer pays its franchiser a large royalty per page printed, shipping charges, and other miscellaneous fees. The Taxpayer requests a ruling on exactly what is taxable under Virginia sales and use tax law.RULING
Va. Code § 58.1-608(3)(b)(v) provides that the retail sales and use tax does not apply to:
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- equipment, printing or supplies used directly to produce a publication described in subdivision 6 c whether it is ultimately sold at retail or for resale or distribution at no cost.
- equipment, printing or supplies used directly to produce a publication described in subdivision 6 c whether it is ultimately sold at retail or for resale or distribution at no cost.
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- [a]ny publication issued daily, or regularly at average intervals not exceeding three months, and advertising supplements and any other printed matter ultimately distributed with or as part of such publications, except that newsstand sales of the same are taxable.
- [a]ny publication issued daily, or regularly at average intervals not exceeding three months, and advertising supplements and any other printed matter ultimately distributed with or as part of such publications, except that newsstand sales of the same are taxable.
To determine whether advertising magazines meet the statutory and subsequent regulatory requirements of an exempt publication, one must examine the legislative history of the exemption. The express statutory reference to advertising supplements in the above Code section indicates that the General Assembly intended for advertising to be outside the scope of the exemption granted for regularly issued and periodic publications. Additionally, a compilation of advertisements promoting the sale of particular property or services would not be considered a publication providing information of general interest to the public under the term as defined in the regulation. The exemption, thus, is limited to publications providing general news and information only and does not extend to those providing only advertising.
Accordingly, based on the above and the rule of strict interpretation of the sales and use tax exemptions established by the courts, the Taxpayer's shoppers magazines do not qualify for the publication exemption. Courts in California (Redwood Empire Publishing Co. v. State Board of Equalization, 207 Cal. App. 3d 1334, 255 Cal Rptr. 514 (1989)) and Maryland (Merriken Publications, Inc. v. Comptroller, Slip. op. No. 393 (Md. Tax Ct. Nov. 3, 1989)) recently have upheld the exclusion of advertising publications from statutes granting sales tax exemption to newspapers and magazines. The California court noted that the U.S. Postal Service has long used the presence of advertising to distinguish and classify periodicals qualifying for second class mailing privileges and cited the judicially recognized distinction between commercial speech and other forms of communication (Va. Pharmacy Bd. v. Va. Consumer Council, 425 U.S. 748 (1976)).
Additionally, the magazines do not qualify for the "catalog" exemption provided in Va. Code § 58.1-608(6)(d) since that exemption is limited to catalogs which are stored for twelve months or less in Virginia and mailed to or distributed outside of Virginia.
Thus, the Taxpayer is subject to the use tax under Va. Code § 58.1-604 on its purchases of printing from the franchiser. Royalty charges paid by the Taxpayer, if only for the intangible right to use the franchiser's name, are not subject to the tax. However, if such charges are based on the number of pages printed, they would be subject to the tax since tangible personal property is received in connection with such royalties. The tax will not apply to delivery or transportation charges if separately stated on the invoice. Handling charges, however, are subject to the tax. Without a specific list of the "other miscellaneous charges" referred to in the Taxpayer's letter, a determination cannot be made regarding their taxability. However, if the franchiser bills the Taxpayer a lump-sum amount, the total charge is subject to the tax.
Please note that if sales tax is paid on the purchases of tangible personal property in another state, the department will grant a credit against the use tax imposed by Virginia on its uses within this state for the amount of tax paid in the state of purchase. ( See VR 630-10-90, copy enclosed)
If you have any further questions regarding this matter, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Related Documents
Rulings of the Tax Commissioner