Tax Type
Retail Sales and Use Tax
Description
Publishing and Broadcasting; Puzzle Magazine
Topic
Taxability of Persons and Transactions
Date Issued
08-10-1992
August 10, 1992
Re: Request for Ruling: Retail Sales & Use Tax
Dear**************
This will reply to your letter of December 23, 1991 seeking a ruling on behalf of an unidentified client (the "Taxpayer") regarding possible sales and use tax collection responsibilities.
FACTS
The Taxpayer, an out-of-state publisher of a series of puzzles published in a magazine form, is interested in entering into a contract with an unrelated out-of-state corporation that has an office in Virginia. The Virginia office would solicit orders for the series of puzzles by telephone with potential customers. All orders would be delivered to the publisher at its offices outside of Virginia. Products would be shipped via U.S. mail to the customer from outside of Virginia. No stock of goods would be maintained in Virginia and the publisher would have no office and no employees in the state. In addition, billing would be sent from outside the state.
You pose four questions relating to the Taxpayer's potential contract and tax liability.
RULING
I will address each of the questions individually below.
Taxability of the above transactions: Va. Code §58.1-612, copy enclosed, provides that the retail sales and use tax shall be collectible from all persons who are dealers and who have sufficient contact with the Commonwealth. A dealer is defined therein as including every person who "sells at retail, or who offers for sale at retail...for use, consumption, or distribution, or for storage to be used or consumed in this Commonwealth, tangible personal property."
Further, it provides that a dealer shall be deemed to have sufficient contact with the state to require registration if he "[s]olicits business in this Commonwealth by employees, independent contractors, agents or other representatives." In the instant case, the Taxpayer is utilizing a Virginia telemarketing business to make sales to Virginia customers and other states' residents. Thus, it would be deemed to have sufficient contact with the state to require registration and the collection of the tax on sales to Virginia residents.
Other taxes for which the state may claim nexus: Under Public Law 86-272, codified at 15 U.S.C.A. §381, Virginia is prohibited from imposing an income tax on a taxpayer if its only business activities within a state during the taxable year are the solicitation of orders for the sale of tangible personal property. Thus, if the Taxpayer's only activities in Virginia will be the sales of its product to purchasers in Virginia by representatives of the telemarketing company, the Taxpayer would be exempt from the Virginia income tax even though it may have income from Virginia sources.
Exclusion of Virginia customers from solicitation efforts: If the telemarketing company excludes Virginia customers from its solicitation efforts, the Taxpayer would not be required to register for collection of the retail sales and use tax since it would not be making sales to Virginia residents.
Qualification of book of puzzles for publication exemption: The Taxpayer publishes a series of thirty volumes of puzzles in a magazine format which are shipped as a continuity series to subscribers every four to six weeks.
"Publication" is described in Va. Code §58.1-608(A)(6)(c) as:
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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.
Such publications are further defined in Virginia Regulation (VR) 630-10-73 as "any written compilation of information available to the general public."
While, the Taxpayer's magazines are shipped to customers at intervals of four to six weeks, a book of puzzles cannot be deemed to be a written compilation of information and thus does not qualify as an exempt publication.
For your convenience, I have enclosed copies of Virginia's sales and use tax registration form and instructions. Should you have any other questions regarding this matter, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner