Tax Type
Retail Sales and Use Tax
Description
Resales; Periodical Subscription Agency
Topic
Taxability of Persons and Transactions
Date Issued
06-05-1992
June 5, 1992
Dear***************:
This will reply to your letter requesting a ruling on the application of sales and use tax to three party transactions involving a subscription agency.
FACTS
The subscription agency orders periodicals from various publishers for its customers and you indicate the instant case is identical to the situation presented in F. W. Faxon Co., Inc. v. Commissioner of Revenue. In that case, the agency was engaged in providing a subscription service for certain library customers. The agency placed the sales orders indicating that delivery be made directly to its customer. The publisher billed the agency whose invoice to its customers included a service fee and any tax charged by the publisher. You ask if the order placed with the publisher by the subscription agency is a sale for resale or a sales transaction between the publisher and the customer under Virginia Retail Sales and Use Tax law.
RULING
Va. Code § 58.1-603 imposes the sales tax upon "every person who engages in the business of selling at retail or distributing tangible personal property in this Commonwealth . . .' Va. Code § 58.1-602 defines the term "retail sale' to mean "a sale to any person for any purpose other than for resale in the form of tangible personal property . . .' (Emphasis added)
Based on the facts presented, the transaction between the agency and its customers constitutes a taxable transaction under Virginia tax law. Moreover, the customer is not making a purchase from the publisher but from the subscription agency, therefore the publisher would not be obligated to collect the Virginia tax from the customer. The publisher's role as that of a supplier of publications to the subscription agency is not subject to the tax as it is an exempt sale for resale, provided the publisher maintains the proper resale exemption certificates in its records.
The Virginia Department of Taxation has no authority to require out-of-state dealers to register for collection and remittance of the sales and use tax unless they have sufficient nexus with the state. Va. Code § 58.1-612 provides the criteria for determining whether a dealer has sufficient activity with Virginia to require registration. Since the taxable sales transaction occurs between the agency and its customers and if the agency is not subject to registration under the nexus requirements, then the agency's customers would be required to remit the use tax.
During a phone conversation with a member of my staff, you indicated that the transaction between the publisher and subscription agency binds the credit of the subscription agency, as exhibited by the fact that the publisher bills the subscription agency and relies on the agency to remit payment as opposed to the customer, thus, it is not acting as an agent in this situation.
I have enclosed copies of the cited Code sections for your information and hope the foregoing has responded to your inquiry. If you have additional questions, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner