Tax Type
Retail Sales and Use Tax
Description
Industrial Materials; Publication of Magazines and Newsletters
Topic
Taxability of Persons and Transactions
Date Issued
04-23-1992
April 23, 1992
Re: §58.1-1821 Application: Retail Sales & Use Tax
Dear*************
This will reply to your letter of September 25, 1991 seeking a refund of sales tax previously paid to various vendors relating to the publication of a magazine and report by your company, ********** (the "Taxpayer").
FACTS
The Taxpayer publishes a variety of publications at average intervals not exceeding three months. While the printing is done in-house for the **********(the "newsletter"), it contracts with another party for the printing of the ***** (the "magazine").
The magazine is a bimonthly publication with a special seventh Buyers' Guide issue. It is distributed free of charge to subscribers in the United States and available for a small fee to subscribers outside North America. While it is published by the Taxpayer, it is printed by another company. Linotron output for camera ready copy and color separations are also done by other companies. The remainder of the production for the magazine is done almost exclusively in-house with desktop publishing software and hardware.
The newsletter is a weekly marketing/management publication. The Taxpayer has another company print the jackets which go into the publication yet handles the remainder of its printing in-house.
The Taxpayer seeks a refund of sales tax previously paid in regard to the production of the above publications.
DETERMINATION
Va. Code §58.1-608(A)(3)(b)(v) provides that the retail sales and use tax does not apply to 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.
A publication is described in subdivision 6 c as any 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. The term is further defined in Virginia Regulation (VR) 630-10-73 as "any written compilation of information available to the general public...[but] does not include general reference materials and their periodic updates." This exemption also extends to advertising inserts or supplements and other printed matter distributed with or as a part of a nontaxable publication.
A review of the publications submitted by the Taxpayer reveals that the magazine and newsletter qualify for the publication exemption and further qualify for the printing exemption. Thus, the Taxpayer may purchase equipment, printing or supplies used directly in producing such publications exempt of the tax. The charges for Linotron page readouts and color separations are exempt as part of the printing of the magazine and the jackets which go into the newsletter may be purchased exempt from the tax. In addition, rate and double postal cards printed for the magazine and envelopes and labels used in mailing it may also be purchased exempt from the tax. You should note that the Taxpayer is not required to collect sales tax on its instate subscriptions to either publication.
The term "used directly" is defined in VR 630-10-63(b)(2) as "those activities that are an integral part of the production of a product, including all steps of an integrated manufacturing process, but not including incidental activities such as general maintenance, management, and administration." In addition, when a single item of tangible personal property is put to use in two different activities, one of which is an immediate part of the industrial production process (exempt) and the other of which is not (taxable), the sales and use tax shall apply in full when the preponderance of the item's use (fifty percent or more) is in nonexempt activities. Thus, provided the computer hardware and software and copier to which you referred in your letter are used fifty percent or more of the time in exempt activities, they, too could have been purchased exempt of the tax.
Accordingly, I find basis for refunding to the Taxpayer sales tax erroneously paid on various purchases, as outlined herein, relating to its magazine and newsletter and subject to the three year statute of limitations, provided you provide additional documentation (e.g., copies of invoices, etc.) supporting your claim for refund. Such documentation should be submitted, within 30 days, to the department's Office Services Division, Technical Services Section, P. O. Box 6-L, Richmond, Virginia 23282.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/5628H
Rulings of the Tax Commissioner