Tax Type
Retail Sales and Use Tax
Description
Advertising; Industry publication
Topic
Taxability of Persons and Transactions
Date Issued
11-28-1994
November 28, 1994
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear***********
This will reply to your letter concerning the retail sales and use tax audit assessment for ******** (the"Taxpayer") for the period January 1, 1989, through September 30, 1991. 1 apologize for the delay in responding to your concerns.
FACTS
The Taxpayer, an association for the food processing machinery and supplies industry, uses conferences, trade shows, and various printed materials to promote its industry. Graphic design services are purchased from vendors in connection with advertising activities of the Taxpayer and furnished to a printer for copying and subsequent distribution to members and others located inside and outside of Virginia. A mailing list of over 30,000 association members and others is used to advertise the conferences and trade shows. The Taxpayer contends that the charges for graphic design services used in advertising are exempt from sales and use tax as provided in Virginia Regulation (VR) 630-10-3.
The Taxpayer publishes a monthly publication that is mailed to members and others. The publication is used to provide general and technical information as well as advertising for the food processing industry. The Taxpayer contends that purchases of graphic design services used in the publishing this publication constitute exempt advertising as provided in VR 630-10-3. They request that the purchases of advertising be removed from the audit.
DETERMINATION
Advertising
Code of Virginia §58.1-609.6(5), exempts from the sales tax charges for "advertising," which is defined in Code of Virginia §58.1-602 as:
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- [T]he planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting or other media, including, without limitation, the providing of concept, writing, graphic design, mechanical art, photography and production supervision. (Emphasis added.)
- [T]he planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting or other media, including, without limitation, the providing of concept, writing, graphic design, mechanical art, photography and production supervision. (Emphasis added.)
A graphic design business providing graphic design services in connection with a specific advertising campaign is deemed to be providing advertising as defined above. In this instance, the graphic design services and the accompanying tangible personal property purchased by the Taxpayer in connection with a specific advertising campaign used to promote the food processing industry are exempt from the tax as advertising services. Such exempt advertising provided to the Taxpayer includes graphic design services used for advertisements placed in trade magazines, corporate annual stockholder reports, posters, conference brochures, and similar items used to promote conferences and trade shows. Charges to the Taxpayer for these items will be removed from the audit.
Graphic design services and the accompanying tangible personal property in connection with the Taxpayer's purchase of letterhead, directories, business cards, tickets, note pads, postcards, presentation kits, floor plans, and similar items for use at conferences and trade shows are subject to the tax. Such items are not considered to be media advertising, as they are not used in media advertising, and will remain in the audit.
Publications
According to the enclosed P.D. 92-35 (April 23,1992), a publisher can purchase equipment, printing or supplies exempt of the tax as provided in Code of Virginia § 58.1-609.3(2)(v) when such items are directly used to produce publications described in Code of Virginia §58.1-609.6(3). These publications must be issued daily, or regularly at average intervals not exceeding three months.
The monthly publication that the Taxpayer furnished to us for review qualifies for the publication and the printing exemptions. Therefore, graphic design services and the accompanying tangible personal property purchased and used to provide the general design and placement of technical information in such a publication, though not considered advertising, are still exempt from the tax even when furnished to a printer for copying.
Based on the foregoing, l will forward this case to the Northern District Office for revision, and an auditor will be contacting the Taxpayer if additional information is needed. Upon completion of their review, a revised notice of assessment will be issued. If you have any questions, you may contact***********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/6683N
Rulings of the Tax Commissioner