Tax Type
Retail Sales and Use Tax
Description
Photography; Photographic film
Topic
Taxability of Persons and Transactions
Date Issued
11-20-1995
November 20, 1995
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear*************
This is in response to your letter of March 28, 1995, seeking correction of the audit assessment to*********(the "Taxpayer").
FACTS
The Taxpayer is a retail fashion photography operation with several locations within the Commonwealth. The Taxpayer will take pictures of clients, develop the film into "proofs" for selection, and after selection, a print of that selection is sold to the customer. As a result of the department's audit, an assessment was made for the untaxed purchase of film used in the Taxpayer's cameras for the photographing portion of its operation. The Taxpayer maintains that the film is an integral part of the photographs it sells and should be exempt of the tax.
DETERMINATION
The department's well established policy with respect to photographers was addressed in the letter of May 3, 1995 from *********, Audit Supervisor of the******* Audit Unit, to the Taxpayer. As cited in that letter, Virginia Regulation (VR) 630-10-82, provides that "[t]he tax applies to sales of photographs, portraits, prints, etc...including, but not limited to charges for labor, photocomposition, setting design, photography time, and any other components of the charge, regardless of whether such components are separately stated." This regulation further provides that"[c]hemicals, paper, and other materials that become a component part of the finished photograph or other print for sale may be purchased under a resale certificate of exemption. Purchases of camera, equipment and other tangible personal property by commercial photographers and others for use and consumption are taxable."
As set forth in P.D. 85-52 (3/14/85), copy enclosed, materials which become a component part of the finished product or which become coated upon or impregnated into the finished product can be purchased tax exempt by a photographer. However, film used by a photographer does not become a component part of the photographer's finished products and is subject to the tax at the time of purchase.
Although I am sympathetic, based on the above, the auditor correctly assessed the tax on the purchase of film in this case. Thus the department has no alternative under the law but to require payment of the tax and interest assessed.
The tax and interest on the uncontested portion of the assessment has been paid. A notice of assessment for the unpaid balance, with interest accrued to date, will shortly be issued. No additional interest will accrue on the outstanding assessment provided full payment is made within 30 days. If you have any questions regarding this letter, you may contact*********of the department's Office of Tax Policy at*************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9692T
Rulings of the Tax Commissioner