Tax Type
Retail Sales and Use Tax
Description
Credit report billing options
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
10-06-1995
October 6, 1995
Re: Request for Ruling: Retail Sales and Use Tax
Dear ****
This will reply to your letter of August 1, 1995 in which you request a ruling as to the sales and use tax application to credit sales billing options for credit or market information services sold by * * * (the"Taxpayer").
FACTS
The Taxpayer is in the business of providing credit reports and stock market information services to its customers. In the past, customers have paid an up front set amount for information furnished by the Taxpayer. Beginning January 1, 1996, the customer will have the option of paying for the information units throughout the year as they are used, in other words a "pay-as-you-go" plan. In addition to paying for the information units, the customer will also be charged an additional $ 25 monthly fee to cover administrative cost, and also a 10% premium charge on the actual information units purchased. The Taxpayer is requesting a ruling on the sales and use tax application to the $ 25 monthly fee charged to its customers who elect this billing option.
RULING
Based on the information provided in your letter, and additional information furnished to a member of my staff, the Taxpayer furnishes information to their customers via two mediums depending on the needs of the customer. Information is transferred to customers either by electronic transmission or by hard copy. Code of Virginia § 58.1-609.5(1) exempts from the sales and use tax "personal service transactions which involve sales as inconsequential elements for which no separate charges are made...". In determining whether a particular transaction involves the sale of tangible personal property or the provision of an exempt service, Virginia follows the "true object" test. Virginia Regulation (VR) 630-10-97.1 provides the following explanation of this test:
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if the object of the transaction is to secure a service and the tangible personal property which is transferred to the customer is not critical to the transaction, then the transaction may constitute an exempt service. However, if the object of the transaction is to secure the property which it produces, then the entire charge, included services provided, will be taxable.
In the case at hand, the true object sought by the customer is the information being provided by the Taxpayer. This is the case whether the information is transferred via electronic means or by hard copy, thus rendering the service provided by the Taxpayer an exempt transaction. Therefore, the additional $ 25 monthly fee paid by the customer to enjoy the "pay-as-you-go" option would also be exempt from the tax. Likewise, the additional 10% premium charge would also be exempt.
If you should have any further questions, please feel free to contact *********** * *, Office of Tax Policy, at * ** **************.
Sincerely,
Danny M. Payne
Tax Commissioner
Rulings of the Tax Commissioner