Tax Type
Retail Sales and Use Tax
Description
Court reporting service; Service vs. Sale
Topic
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
05-12-1995
May 12, 1995
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear*************
This is in response to a meeting between representatives of*************, acting on behalf of ***** (the "Taxpayer"), and the department. Your case will be treated as an application for correction of an assessment under Code of Virginia §58.1-1821 since an assessment was issued to the Taxpayer that includes the issue discussed in the meeting.
FACTS
The Taxpayer is a court reporting business that prepares written transcripts of depositions and testimony taken from persons involved in legal proceedings. The transcripts are furnished to the attorney (the "requesting party") requesting the Taxpayer's services for a fee that includes labor, transcription costs, and copies of the transcript. The Taxpayer normally furnishes an original and one copy of a transcript to the requesting party.
In some instances, the other party in the legal proceedings may request copies of the same transcripts. Charges for copies sold to the other parties were deemed taxable sales in an audit of the Taxpayer for the period October 1988 through August 1994. Additional copies sold to requesting parties were also treated as taxable sales.
The Taxpayer protests the assessment of tax on its sales of additional copies to requesting parties and on sales of copies to other parties involved in the legal proceedings.
DETERMINATION
Code of Virginia §58.1-609.5(1) provides an exemption from the sales and use tax for "[p]rofessional, insurance, 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. Virginia Regulation (VR) 630-10-97.1 (copy enclosed) discusses the true object test.
The department previously addressed court reporting services in P.D. 88-263 (9/21/88, copy enclosed) which states that the tax applies "to any sales of tangible personal property that are not related to the provision of court reporting services." The department agreed that the "true object" in that case was to obtain the court reporter's professional expertise in recording depositions and transcribing them into written legal documents. Tangible personal property transferred in such transactions was deemed inconsequential. Based on the above, charges for copies of transcripts are exempt when provided to Parties in the legal Proceedings.
However, transcript copies provided to third parties who are not part of legal proceedings would be considered taxable sales. The Taxpayer should pay the sales and use tax on paper, supplies, and any other tangible personal property used and consumed in its provision of court reporting services.
The Taxpayer's assessment will be adjusted to remove sales of transcripts to parties who were a part of the legal proceedings for which the Taxpayer's services were engaged. If you have any questions concerning this letter, you may contact*********.
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- Sincerely,
Danny M. Payne
Tax Commissioner
- Sincerely,
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OTP/8824S
Rulings of the Tax Commissioner