Tax Type
Retail Sales and Use Tax
Description
Publishing and broadcasting; Reporter of current court rulings
Topic
Taxability of Persons and Transactions
Date Issued
05-13-1994
May 13, 1994
Re: Section 58.1-1821 Application: Retail Sales and Use Tax
Dear*************
This will reply to your letter seeking correction of a retail sales and use tax assessment on behalf of your client, **************(the "Taxpayer").
FACTS
The Taxpayer publishes material (the "publication") which contains the full text of new Supreme Court and Court of Appeals decisions prior to such cases being published in official reports. Each issue also contains unofficial digests and summaries written by the Taxpayer for each case reported in that issue. Issues are sold to subscribers through the U.S. mail; issues are not sold at newsstands. Periodic issues distributed during each subscription year comprise one volume. Subscriptions are not limited to a particular segment of the population. Since 1980, various issues have been distributed at average intervals of three weeks.
The Taxpayer believes that its publication qualifies for the exemption provided under Va. Code §58.1-609.6(3) and has never collected sales tax on subscriptions. Upon audit, the department held the taxable on the basis that the issues published by the Taxpayer are general reference materials; therefore, they do not satisfy the definition of a publication provided in Virginia Regulation (VR) 630-10-73(B) and do not qualify for the exemption.
DETERMINATION
Va. Code §58.1-609.6(3) provides an exemption from the sales and use tax for:
-
- [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.
Publication is defined in VR 630-10-73 as "any written compilation of information available to the general public," and provides that the term does not include general reference materials and their periodic updates. Thus, any publication, other than a general reference material and its periodic updates, which is published at least four times a year, available to anyone (availability not restricted to a particular group), and containing a written compilation of information qualifies for the above exemption.
The department has previously ruled that various "reporters" are taxable as general reference materials. See P.D. 92-233 (11/9/92) (copy enclosed). The Taxpayer's publication is a reporter of current appellate and supreme court rulings and provides summaries of those rulings. It provides subscribers with a quick source of information on matters of a specialized interest (legal matters). The Taxpayer's publication is considered a general reference material and does not qualify for the exemption provided in Va. Code §58.1-609.6(3).
You contend that VR 630-10-73 contemplates that general reference materials are publications that are supplemented with periodic updates and because no subsequent publication is issued to update a previous issue or volume of the Taxpayer's publication, there is no basis to classify the publication as a "general reference material." However, VR 630-10-73 merely clarifies that the periodic updates to general reference materials are treated in a similar manner as the reference materials, and may not be treated as a separate "publication." The regulation does not limit the definition of general reference material to publications that are supplemented with updates nor does it require that, in order to be considered a "general reference material," a publication must have periodic updates or separate volumes supplementing the original issue.
You also argue that the regulation's restriction of the definition of "publication" to exclude general reference materials is inconsistent with the clear language of Va. Code §58.1-609.6(3), which you contend exempts all publications from sales tax. Therefore, you maintain that the regulation is invalid.
Contrary to your argument, Va. Code §58.1-609.6(3) does not exempt all publications from sales tax, and this has been recognized by various courts in Virginia. See Jefferson Publishing Co. v. W. H. Forst, 217 Va. 988, 234 S.E.2d 297 (1977), (the statutory and administrative definition of publication upheld) and Lawrence Carr Jr. and Debra A. Carr, individually and trading as Homes and Land Magazine v. W.H. Forst, Circuit Court of the city of Newport News (May 28, 1993) (magazines which are primarily a compilation of advertisements are not exempt publications).
Furthermore, the regulation excluding general reference materials from the definition of "publication" was promulgated pursuant to the Administrative Process Act (Va. Code §9-6.14:1 et seq.). Under Va. Code §58.1-205(2), any regulation promulgated pursuant to the Administrative Process Act shall be sustained unless unreasonable or plainly inconsistent with applicable law. The regulation in its current form was initially published in January 1985 and has been consistently applied by the department. Since the regulation was published in January 1985, the General Assembly has not amended the exemption, indicating acquiescence in the regulation's definition of "publication" and the exclusion of general reference materials from the scope of the exemption.
Finally, you assert that the department has made identical claims against a similar publication and subsequently withdrawn those claims; therefore, the claim against the Taxpayer should also be withdrawn. However, the case you cite is clearly distinguishable from the Taxpayer's situation. In the case you cite, the publication contained articles, news stories, and letters to the editor, items which are consistent with the department's definition of publication. The Taxpayer's publication does not contain these features, but rather provides the full text of certain court decisions and unofficial digests and summaries of those decisions.
Based upon the foregoing, the tax was appropriately assessed against the Taxpayer. However, based upon the circumstances outlined in your letter, I will consider a reasonable offer in compromise, provided that the Taxpayer begins collection of the tax on future Virginia sales. A representative of the department will contact you shortly to discuss a compromise.
Sincerely,
Danny M. Payne
Acting Tax Commissioner
OTP/7609F
Rulings of the Tax Commissioner