Tax Type
Retail Sales and Use Tax
Description
Services; Miscellaneous service enterprises; Government service contract
Topic
Taxability of Persons and Transactions
Date Issued
03-15-1995
March 15, 1995
Re: Request for Ruling: Retail Sales and Use Tax
Dear***********
This is in response to your letter of February 6, 1995 in which you seek a ruling on the application of the retail sales and use tax to activities performed by**************(the Taxpayer).
FACTS
The Taxpayer has entered into a contract with an agency of the federal government to provide support services for the agency's Public Services Program. Under the terms of the contract, the Taxpayer provides management, materials, personnel, equipment and services for a number of functions.
Specifically, the Taxpayer is required to operate the agency's public mail center and provide distribution of educational and public information materials; prepare written and photographic material to support publication of the agency's internal newspaper; provide writing and research for news releases, feature articles and other publications; operate and maintain a traveling exhibit program, including the design and fabrication of exhibits; and provide administrative and logistical support necessary to plan and conduct conferences, workshops and meetings.
DETERMINATION
The department has previously ruled that in considering the tax treatment of federal government contracts, it must first be determined whether the contract is for the sale of tangible personal property or whether the contract is for the provision of services to the government. If the contract is for the provision of services, and in connection with those services tangible personal property is provided, the contractor is deemed to be the user and consumer of that property and must pay the tax on the purchases.
The contract at issue reveals that the true object is the provision of services by the Taxpayer to the federal government. Accordingly, the tangible personal property which the Taxpayer purchases to satisfy its contractual requirements is taxable at the time of purchase. If the Taxpayer's vendors are not registered to collect the tax, the Taxpayer is required to remit the tax directly to the department.
Furthermore, even in those instances when the Taxpayer is required to purchase deliverables or component parts used in the construction of exhibits, such deliverables, if purchased under the Taxpayer's name, are also subject to the tax. This general rule is set out in Virginia Regulation (VR) 630-10-45(E).
Finally, I wish to alert you to a potential exemption regarding the purchase of printed materials. I understand that printed materials for distribution at conferences and workshops is currently produced or purchased directly by the federal agency and not by the Taxpayer. As an instrument of the United States, the agency may make such purchases exempt of the tax pursuant to Code of Virginia §58.1-609.1(3).
If, in the future, the Taxpayer purchases the printing, an exemption may exist under VR 630-10-86 8 (letters, brochures and similar printed materials). As set forth in the regulation, certain printed materials are exempt from the tax when stored for twelve months or less in Virginia and distributed outside of Virginia. Should this situation arise, please contact the department for more information on the printing exemption.
I have enclosed Public Documents 86-243 (11/28186) and 92-229 (1119192) which more fully address the department's policy on government contractor purchases and which appear analogous to the Taxpayer's situation.
If you have additional questions regarding this issue, you may contact*********in my Office of Tax Policy at*********
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- Sincerely,
Danny M. Payne
Tax Commissioner
- Sincerely,
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OTP/9354I
Rulings of the Tax Commissioner