Tax Type
Retail Sales and Use Tax
Description
Manuals purchased for use in government-sponsored seminars
Topic
Taxability of Persons and Transactions
Date Issued
09-13-1995
September 13, 1995
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ***************:
This will reply to your letter of June 30, 1995 in which you seek correction of a sales and use tax assessment for your client,*******************(the "Taxpayer"), for the period of December 1991 through November 1994.
FACTS
The Taxpayer provides counseling to federal employees about their retirement, salary, and benefit options. One form of the counseling is through seminars conducted at the employees' work locations. The Taxpayer contracts with an employer, generally a federal agency, to conduct a seminar. The charge for the seminar includes a charge for "reference manuals" which are provided to attendees.
You contest the tax assessed in the recent audit with respect to the manuals provided to seminar attendees. The auditor held the manuals taxable as being used in the provision of a nontaxable service. You suggest that the Taxpayer resells the manuals to the federal government and thus the manuals were appropriately purchased exempt of the tax as purchases for resale. You also suggest that while the Taxpayer's invoices do not provide a separate charge for the manuals, the fact that clients are provided an option of reproducing the manuals themselves, thereby substantially reducing the fee for the seminar, readily suggests that the manuals are resold.
DETERMINATION
In P.D. 86-158 (7/31/86), copy enclosed, the department ruled that the true object of a transaction involving the teaching of a course and the provision of instructional materials therewith, is the provision of a nontaxable service and thus the entire charge for the course, including any charges for required workbooks and tapes provided to course participants, was exempt from the tax as a nontaxable service.
The same holds true in the instant case. While the Taxpayer may offer customers the option of making copies of the manual for a reduction in the seminar charge, from the information provided it appears that this option is allowed only after a minimum level of seminar participants has been achieved. In addition, it is my understanding that rarely is this option exercised, and even if it is, it does not change the nature of the transaction -- the true object remains the provision of the Taxpayer's services.
Accordingly, the assessment as issued is correct. The Taxpayer is required to either pay the tax to its suppliers at the time of purchasing the manuals or remit the use tax directly to the department based on the cost price of such. However, in the event the Taxpayer changes its billing process and begins to separately state on its invoices charges for the instruction and charges for manuals, it may purchase the manuals exempt from the tax under a resale exemption certificate. The Taxpayer must then charge the tax on the sales price of the manuals, unless the purchaser is an exempt entity (i.e., the federal government). Likewise, when the Taxpayer sells its manuals apart from the provision of a seminar, the manuals generally would be taxable at the time of sale to a customer unless the customer is an exempt entity.
A revised Notice of Assessment with accrued interest will be mailed to the Taxpayer shortly. Should you have any questions about this matter, please contact***** in my Office of Tax Policy at *************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9932H
Rulings of the Tax Commissioner