Tax Type
Retail Sales and Use Tax
Description
Marketing services
Topic
Taxability of Persons and Transactions
Date Issued
11-21-1995
November 21, 1995
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear************:
This will reply to your letter in which you seek correction of the sales and use tax assessment issued to **********(the "Taxpayer") for the period October 1991 through July 1994.
FACTS
The Taxpayer operates several grocery stores located within the Commonwealth. The Taxpayer takes exception to the tax assessed by the auditor for services provided by a marketing services corporation which includes the provision of tangible personal property. The Taxpayer maintains that the tangible personal property, i.e. coupons, coupon saver cards, window signs, and other advertising materials are provided at no charge and are used in the implementation of the Taxpayer's markdown program. The weekly flat fee charged by the vendor represents the right to use the promotional trademark and the computer tracking services provided by the vendor. The Taxpayer maintains that such charges represent a nontaxable service.
DETERMINATION
Virginia Regulation (VR) 630-10-97.1 (copy enclosed) provides an exemption for services which involve sales as inconsequential elements for which no separate charge is made. A "true object" test is used to determine whether a particular transaction which involves both the rendition of a service and the provision of tangible personal property constitutes an exempt service. In applying the true object test in this instance, the true object sought by the Taxpayer is the rendition of a service.
The provision of the coupons, saver cards, and other promotional advertising materials is incidental in nature with respect to the controlled markdown services sought by the Taxpayer. Thus, as the provider of the service, the vendor is subject to the tax on all tangible personal property purchased in providing such exempt service.
Accordingly, the Taxpayer's assessment will be revised to remove the tax and interest assessed with respect to charges for the*********markdown program. If you have any questions regarding this letter, please contact*********of my Office of Tax Policy at**********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9084T
Rulings of the Tax Commissioner