Tax Type
Retail Sales and Use Tax
Description
Data Conversion
Topic
Exemptions
Date Issued
11-27-1991
November 27, 1991
Re: §58.1-1821 Application: Retail Sales & Use Tax
Dear*********************
This will reply to your letter of July 18, 1991 in which you seek correction of an assessment to ************** (the "Taxpayer") for the period February 1988 through December 1990.
FACTS
The Taxpayer has contracted with another company (the "Company") to maintain a master file on its customers, provide analysis and generate reports. Customer information is transferred to the Company, converted to a usable format and maintained in a master file. The master file is updated monthly and reports are generated at the Taxpayer's request and according to its specifications. In the recent audit, the charges by the Company for converting the data, updating the master file, producing reports, and other services in connection with the master file were held taxable.
The Taxpayer contests the imposition of the tax on these services which it maintains are exempt as "professional, insurance and personal services" under Va. Code §58.1-608(A)(5)(a) and notes that the tangible personal property provided is merely incidental to the services provided. In addition, the Taxpayer points out that the services provided by the Company are similar to those previously provided by another company to the Taxpayer which were held nontaxable by the department in a prior determination.
DETERMINATION
Virginia Regulation (VR) 630-10-97.1 discusses the "true object" test for determining whether a transaction represents a taxable sale of tangible personal property or a nontaxable sale of a personal or professional service. Based upon this regulation and P.D. 91-81 (5/15/91) which is directly on point with this case, computer services such as those provided by the Company to the Taxpayer are exempt from the tax as the true object is the receipt of customized information rather than a tangible report.
Thus, the assessments will be revised accordingly and a refund will be issued to the Taxpayer as soon as practicable.
If you have any questions regarding this, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/5417H
Rulings of the Tax Commissioner