Tax Type
Retail Sales and Use Tax
Description
Manufacturing, processing, assembling, or refining; Producer of maps
Topic
Taxability of Persons and Transactions
Date Issued
06-20-1994
June 20, 1994
Re: §58.1-1821 Application: Sales and Use Tax
Dear**************
This will reply to your letters in which you seek correction of a sales and use tax assessment for *************(the "Company").
FACTS
The Company is in the business of producing maps for sale to its clients. A typical transaction begins with a client contacting the Company to order a map or image of a particular geographic area. The Company will order the desired image from one of its suppliers. The images are recorded by a satellite which relays the information to a receiving station. At the receiving station the image is down loaded onto digital tapes which are shipped to the Company.
The Company then processes the tape through its computer to convert the digital information into one of three different end products. The products include: (1) an actual map on paper; (2) a map on mylar paper; or (3) a map in the form of magnetic tape (such products shall be referred to herein as the "Maps").
The Company also creates and produces specialty products, posters, objects of art, and watches, (the "Products"). The Products are produced on the same equipment that the Company uses to produce the Maps.
The Company contests the imposition of sales and use tax on equipment used to produce the Maps and the Products claiming that it is an industrial manufacturer and is, therefore, exempt from the tax.
DETERMINATION
Va. Code §58.1-609.3(2)(i) provides an exemption from the sales and use tax for equipment used directly in the manufacturing of products for resale "in the industrial sense." Upon further review, the Maps and Products undergo a substantial mechanical transformation consistent with that of "manufactured" products. In addition, the Company produces the Maps and Products in significant volumes and employs sophisticated equipment in its production process. Based upon these factors, the Company can be contrasted to less sophisticated map drafting services that are classified in Code 73 of the Standard Industrial Classification Manual and likened more to publishers and printers of maps that are classified in Code 27 of the SIC Manual and are deemed to be "industrial in nature."
Your request for correction of the assessment is, therefore, granted based upon the determination made herein. The department's auditor will review the assessment and remove any tangible personal property that is deemed to be "used directly" in production.
Sincerely,
Danny M. Payne
Acting Tax Commissioner
OTP/6446O
Rulings of the Tax Commissioner