Tax Type
Retail Sales and Use Tax
Description
Services; Professional or personal; Information technology consulting
Topic
Taxability of Persons and Transactions
Date Issued
12-21-1993
December 21, 1993
Re: for Ruling: Retail Sales & Use Tax
Dear******************
This will respond to your letter of December 7, 1992 in which you seek a ruling on the appropriate tax treatment of sales of various services and products by your client, the "Taxpayer."
FACTS
The Taxpayer is engaged in providing timely information, research and analysis for its clients with regard to the information technology industry. The methods for delivering such information are through consultations, seminars and printed reports. You seek a ruling on the tax treatment of the various services and products provided by your client.
RULING
Va. Code §58.1-608(A)(5)(a) exempts from the sales and use tax "personal service transactions which involve sales as inconsequential elements for which no separate charges are made..." In determining whether a particular transaction involves the sale of tangible personal property or the provision of an exempt service, Virginia follows the "true object" test. Virginia Regulation (VR) 630-10-97.1 provides the following explanation of this test:
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- 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.
- 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.
Subscription Services
The Subscription Services offered by the Taxpayer cover Research Sets - a detailed five year forecast of key issues and strategic planning assumptions in particular segments of the information technology industry, tickets to conferences and seminars, telephone consultations, and on-line services access. The Taxpayer charges a fixed fee which entitles a customer to all of the above. You seek a ruling as to the tax treatment of the total charge as well as the charges for each of the above when separately stated.
Based upon the information provided, the total charge for the above qualifies for exemption from the tax as an exempt service since the object of the transaction is the provision of information, and not the sale of tangible personal property.
The appropriate tax treatment of the Taxpayer's products/services if sold at a separately stated prices, apart from the sale of other products/services is explained below.
Research Sets
The Research Sets are comprised of Research Notes -- brief updates on recent developments in and issues of importance to an industry which are issued on subscription approximately every two weeks -and Analysis Reports -- reports issued on a periodic basis containing more detailed information on the issues covered, including evaluations of key trends, industry developments, vendors, products and services. You maintain that they are not general reference materials, but are publications available to the general public.
From the information provided, it appears that the Sets qualify for exemption from the sales and use tax as exempt publications under Va. Code §58.1-608(A)(6)(c). This provision specifically exempts from the tax "[a]ny publication issued daily, or regularly at average intervals not exceeding three months, and advertising supplements...." While the Analysis Reports are issued on a periodic basis, it appears that they may be published infrequently and thus would not qualify as exempt publications. However, without actually reviewing a copy of the materials, I cannot render a definitive ruling whether these are exempt publications or general reference materials. Reference materials and their periodic updates are taxable.
Conferences and Seminars
The Taxpayer holds two or three day service conferences, and periodic one-day seminars and presentations for clients and nonclients for a fixed fee. The department has ruled on a similar issue, training programs, in P.D. 86-158 (7/31/86). copy enclosed. Thus, the provision of conferences and seminars by the Taxpayer is deemed to be a nontaxable service. The Taxpayer is the user and consumer of all items purchased for use in such conference and seminars, i.e., reading materials. However, if the Taxpayer sells any conference materials or tapes apart from the provision of the conference, such items will be subject to the tax at the time of sale
Telephone Consultations
The Taxpayer, its research staff, responds to client telephone inquiries. The department has previously ruled in P.D.87-209 (9/15/87), copy enclosed, that the provision of telephone consultation services is a nontaxable service.
Custom Consulting
The Taxpayer provides three general types of consulting services: group consulting services, group retainer consulting, and strategic advisory services. The group consulting services includes primary research, data gathering and analysis. In addition, it may include strategic planning, technical strategy review, organization and management reviews, competitive surveys, etc. The group retainer consulting service is designed to address clients' time sensitive needs for tactical and strategic market research and analysis. The strategic advisory services are on-site services provided by the Taxpayer's analysts. All of the above consulting services are customized to customer needs and accordingly are nontaxable.
If the Taxpayer produces additional copies of an original report prepared specifically for a customer, it must charge the tax on the sale of such copies.
Research Products
The Taxpayer sells various research and training products, including audio and video cassette tapes of selected conferences, as well as some of the newsletters provided with subscription services. The "true object" of this type of transaction is the tangible personal property involved and thus sales of such research and training products are subject to the tax.
On-line Access
Customers equipped with personal computers and modems may have dial-in access to the research performed by the Taxpayer through an "on-line" computer service, for which they are charged a flat hourly access fee. The department previously ruled in P.D. 89-179 (5/31/89), copy enclosed, that transactions involving data accessed on-line by personal computers are nontaxable service transactions.
If you have any other questions, please contact the department.
Sincerely
W. H. Forst
Tax Commissioner
OTP/6598H
Rulings of the Tax Commissioner