Tax Type
Retail Sales and Use Tax
Description
Services; Professional or personal; Filewrapper services
Topic
Taxability of Persons and Transactions
Date Issued
09-28-1994
September 28, 1994
Re: Request for Ruling: Retail Sales and Use Tax
Dear******************
This will reply to your letter of July 5, 1994 in which you request a ruling on the application of the sales and use tax to certain activities conducted by********(the "Taxpayer").
FACTS
The Taxpayer's primary business involves and translation activities in regard to patents. As part of its business, the Taxpayer is starting a new activity known as a "filewrapper service." This activity involves providing a copy of all documents in the public domain from an official file concerning a piece of intellectual property, most frequently patent related. This file is a chronological sequence of documents containing correspondence with the applicant, the Patent Office, and any other interested third party.
You request a ruling as to whether or not the Taxpayer must collect sales tax on the charge for the filewrapper service.
RULING
Va. Code §58.1-609.5(1) provides an exemption from the sales and use tax for "[p]rofessional, , or personal service transactions which involve sales as inconsequential elements for which no separate charges are made...." In order to determine whether a particular transaction which involves both the rendering of a service and the provision of tangible personal property constitutes an exempt service or a taxable retail sale, the "true object" of the transaction must be examined. See Virginia Regulation (VR) 630-10-97.1 (copy enclosed).
The department has previously ruled in P.D. 90-224 (12/13/90) and P.D. 92-59 (5/1/92) that copies of medical records sold to third parties are deemed to be taxable sales of tangible personal property as opposed to nontaxable services based upon an examination of the "true object" test as provided in VR 630-10-97.1. While the taxpayer was providing personal services in the rendition of its operations, the "true object" of the transaction was the end product of the taxpayer's services - the tangible copy of the medical records.
In the Taxpayer's case, personal services are involved in providing the patent-related documents. However, the "true object" of the transaction is the tangible copy of the documents. Therefore, the charge for the "filewrapper service" is subject to the sales and use tax.
You believe the facts in P.D. 86-216 (11/3/86) are similar to the Taxpayer's case and cite that ruling to support your position that the "filewrapper service" should be exempt from the tax. However, in P.D. 86-216, the taxpayer was providing selected financial information to its customers and created a document tailored to the customer's specific needs. In the Taxpayer's case, it is gathering and copying existing documents. The Taxpayer's operations more closely resemble those in P.D. 90-224 and 92-59. Therefore, the charge for the "filewrapper service" is subject to the sales and use tax.
If you have any additional questions regarding this matter, please contact the department.
Sincerely,
Danny Payne
Tax Commissioner
OTP/8257F
Rulings of the Tax Commissioner