92-138 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Services; Professional or Personal; Multiple Real Estate Listing Service

Topic

Taxability of Persons and Transactions

Date Issued

08-10-1992

August 10, 1992

Dear****

This will reply to your letter of April 30, 1990 in which you seek correction of a sales and use tax audit of * * * (the Taxpayer) for the period of September, 1986 through July, 1989.

FACTS

The Taxpayer is a multiple listing service providing participating realtors with information regarding real estate listed for sale in the area in which they sell real estate. Information pertaining to all real estate listed for sale is disseminated by means of computerized systems which may be accessed by participants having on-line computer systems in their office, and also by a monthly book distributed to all participating members. Each participant in the multiple listing service pays to the Taxpayer a monthly fee which entitles the participant to the computer access and the monthly book. The Taxpayer purchases the monthly listings book from a local printer and distributes one copy to each participant.

The Taxpayer pays to the printer the sales tax on the purchase of the publication.
As a result of a recent sales and use tax audit, the Taxpayer was assessed sales tax on the monthly fee charged to all participants of their multiple listing service, as it included the transfer of tangible personal property, i.e. monthly books. The Taxpayer takes the position that the monthly fee paid by participants is for services rendered and that the Taxpayer is the consumer of the monthly book for which they have properly paid the sales tax to the vendor.

DETERMINATION

Va. Code Sec. 58.1-608(A)(5)(a) provides a sales and use tax exemption for, "professional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made.'

In addition, Virginia Regulation (VR) 630-10-97.1, set forth below, addresses transactions involving both the rendering of a service and the provision of tangible personal property and the implementation of a test to determine the "true object' of such transaction.

In order to determine whether a particular transaction which involves both the rendering of a service and the provision of tangible personal property constitutes an exempt service or a taxable retail sale, the "true object' of the transaction must be examined. If the object of the transaction is to secure a service and the tangible personal property which is transferred to the customer is not critical to the transaction, then the transaction may constitute an exempt service. However, if the object of the transaction is to secure the property which it produces, then the entire charge, including services provided, will be taxable.

The "true object' of the transaction in the present case is the provision by the Taxpayer of a nontaxable service, i.e. the multiple listing service. The provision of the multiple listing book is inconsequential to the overall service being provided by the Taxpayer. Therefore, the Taxpayer is the user and consumer of all items purchased in providing such service and correctly paid the tax to the printer at the time that the books were purchased. The audit will be adjusted accordingly.

If you should have any questions, please feel free to contact the department.

Sincerely

W. H. Forst
Tax Commissioner

Rulings of the Tax Commissioner