Tax Type
Retail Sales and Use Tax
Description
Advertising; Pamphlets and Engravings for Use in Newspapers and Magazines
Topic
Taxability of Persons and Transactions
Date Issued
07-20-1992
July 20, 1992
Re: Request for Ruling: Retail Sales and Use Tax
Dear***********
This will reply to your letter of April 17, 1991 in which you request a ruling on behalf of your client **********(the Taxpayer), whom you do not identify.
FACTS
The Taxpayer is an advertising business that provides general advertising service to clients in Virginia and other states. Among other services, the Taxpayer contracts with Virginia printers to print advertising pamphlets and Virginia engravers to make engravings for use by newspapers and magazines for printing the advertisements designed and created by the Taxpayer. The Taxpayer seeks a ruling on the applicability of the sales and use tax on pamphlets and engravings produced by Virginia printers and engravers for delivery to the Taxpayer, its clients, or a newspaper or magazine located either within or outside the Commonwealth. It is the Taxpayer's contention that any out-of-state deliveries should be tax exempt.
RULING
Va. Code §58.1-608(A)(6)(e) provides an exemption from the sales and use tax for "advertising" which is defined in Va. Code §58.1-602 as "the planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting and other media, including, without limitation, the providing of concept, writing, graphic design, mechanical art, photography or production supervision. Any person providing advertising as defined herein shall be deemed to the user or consumer of all tangible personal property purchased for use in such advertising." Virginia Regulation (VR)630-10-3 further provides that "...the tax applies to all purchases by an advertising business including, without limitation, the following items:...[p]rinting, including direct mail items...and similar printed materials whether or not any of such materials are intended for distribution out of the state."
The Taxpayer presents three fact patterns and requests a ruling on the applicability of the tax on the transactions.
Pick-up in Virginia
In the first fact pattern, the Taxpayer creates and designs advertising pamphlets and engravings and contracts with Virginia printers and engravers to produce the finished product. The Taxpayer picks up the printing or engravings at the printer's or engraver's place of business in Virginia. As stated in your letter, the transaction is taxable.
Delivery in Virginia
The facts are the same in the second fact pattern, but the printer or engraver delivers the pamphlets or engravings to the Taxpayer, its client, or a newspaper or magazine located in Virginia. As stated in your letter, the transaction is taxable.
Out-of-state Delivery Directed by Taxpayer
The facts are the same in the third fact pattern except the pamphlets or engravings are delivered to the Taxpayer, its client, or a newspaper or magazine outside Virginia.
Virginia Regulation (VR) 630-10-51 provides in pertinent part that a sale in interstate commerce occurs only when title or possession to the property being sold passes to the purchaser outside of Virginia and no use of the property is made within Virginia.
Title of pamphlets or engravings that are purchased by an out-of-state advertising business and delivered by the Virginia printer or engraver to an out-of-state client, newspaper or magazine at the direction of the advertising business, passes to the advertising business within Virginia. The advertising business makes use of the property by directing the shipment of items. The Virginia Supreme Court has held that "[I]f a taxable event occurs in Virginia the subsequent delivery of property outside of this State does not immunize the taxable event." Commonwealth v. Miller-Morton, 220 Va. 852, 858 (1980). Therefore, under the facts presented, the advertising business is liable for the tax.
If the Taxpayer is an out-of-state advertising business and has the printing or engravings delivered directly to itself using one of the transportation methods outlined in VR 630-10-51, then the transaction will be exempt.
P.D. 88-66 (4/11/88) does not apply because under the current facts the taxpayer is an advertising business and deemed to be the user and consumer of the tangible personal property purchased in the performance of an advertising campaign, including printing, and therefore liable for the tax if directing the Virginia entity to deliver the items to a third party. (See P. D. 88-62 and P.D. 91-197)
This tax treatment of purchases of printing and engravings as outlined in the third fact pattern applies to advertising businesses for use in media advertising campaigns. For example, purchases of printing by the advertising business's client may be exempt under the exemption provided under Va. Code §58.1-608(A)(6) (d) if it contracts directly with a Virginia printer. Similarly, the exemption may apply when the advertising business purchases printing for resale to a client in connection with a transaction that does not entail the provision of media advertising services.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/5126I
Rulings of the Tax Commissioner