Tax Type
Retail Sales and Use Tax
Description
Statute of limitations; Extended statute of limitations
Topic
Collection of Delinquent Tax
Date Issued
01-06-1995
January 6, 1995
Re: §58.1-1821 Application: Consumer Use Tax
Dear**************
This will reply to your letter of March 7, 1994 in which you seek correction of a consumer use tax assessment for ************* (the "Taxpayer").
FACTS
The Taxpayer is a health care consulting firm. An audit of the Taxpayer for the period June,1989 through November,1993 resulted in an assessment for its failure to remit use tax on purchases of tangible personal property used in its operation.
The Taxpayer protests the tax assessed on a computer system, design charges, a research journal and certain printed aerial navigational materials. The Taxpayer also protests the assessment of tax for a period exceeding three years.
DETERMINATION
I will separately address below the issues raised by the Taxpayer.
Computer System
The invoice presented shows that the Taxpayer was charged sales tax of on a computer system purchased for ********** from a Maryland vendor who shipped it directly to the Taxpayer in Virginia. Based on such evidence, the Taxpayer requests abatement of the tax assessed on the computer system.
Under the provisions of Code of Virginia §58.1-205, the Taxpayer has the burden of proving that Virginia sales or use tax has been charged and paid on the purchase. The Taxpayer has not met its burden of proof. The sales invoice indicates that Maryland sales tax at the rate of 5% was erroneously charged and paid. In such an instance, a tax credit is not applicable. See Virginia Regulation (VR) 630-10-29, copy enclosed. Accordingly, as this item was first used in Virginia, l find no basis to remove this item from the audit, but will correct the measure used in the audit to
Design and Printing Charges
The sales tax is imposed on the gross sales price of tangible personal property when sold at retail. Code of Virginia §58.1-602 defines "sales price" to mean "the total amount for which tangible personal property or services are sold, including any services that are a part of the sale...without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any other expenses whatsoever."
In this case, tax was assessed on the total charge for the design and printing of letterhead, envelopes and business cards. You assert, however, that the Taxpayer should not be subject to tax on the design charges. On the contrary, l would note that the transaction is not merely to obtain blank stationary, envelopes or business cards. Rather, the true object of the transaction is to secure finished printed materials with the Taxpayer's logo design. Thus, the logo design services are a related part of the sale and therefore taxable. Furthermore, had the logo been purchased in a separate transaction, the total charge for such would be taxable as set forth by P.D. 88-15 (114188), copy enclosed.
Printed Materials
Code of Virginia §58.1-609.6 (3) provides an exemption from the sales and use tax for "[a]ny publication issued daily, or regularly at average intervals not exceeding three months. . .[except] newsstand sales of the same are taxable." VR 630- 10-73 further provides that an exempt "publication" shall mean "any written compilation of information available to the general public...[but] does not include general reference materials and their periodic updates. "
Concerning the US Area Navigation (ENR), US High Altitude Enroute, US East (ENR-TERM) and US North Central (ENR-TERM), these contain aerial navigational references (maps, approach plates or airport charts) serving as useful sources of flight information for pilots. Subscription services for these publications provide periodic updates which revise information presented in prior issues. While available to the general public, these publications, and updates thereof, are taxable reference materials.
Concerning the Pharmacoepidemiology & Drug Safety: An International Journal, this publication is published bi-monthly and available to the general public. Each issue presents a variety of research reports, reviews, editorials and commentaries embracing scientific, medical, statistical and legal aspects of pharmacoepidemiology and studies on drug safety. Based on these facts, I find that a subscription to this journal qualifies as an exempt publication under the above cited exemption. Accordingly, this item will be removed from the audit.
Statute of Limitations
The department has the authority under Code of Virginia §58.1 -634, copy enclosed, to extend the three year statute of limitations to a six year period for sales or use tax assessments when a taxpayer fails to file a return within the three year statutory period.
The Taxpayer protests the assessment of taxes for a period greater than three years because the auditor indicated in a letter dated December 8,1993 that the audit period would cover a particular three year period. Since the Taxpayer had not been registered for consumer use tax prior to the audit, but was registered with the department for employer income tax withholding since October 1,1990, the auditor assumed that this was the beginning date of the business and that there were no taxable purchases prior to that time. It was not discovered until auditing that the Taxpayer had failed to pay consumer use tax on several purchases made prior to October, 1990. Accordingly, since no consumer use tax returns were filed during the normal three year statutory period, the auditor was justified in extending the audit period.
Based on all of the foregoing, the assessment will be adjusted to change the taxable measure of the computer system and to remove the exempt journal, but is correct in all other respects. The Taxpayer will receive a revised "Notice of Assessment" as soon as practicable. If you have any questions regarding this determination, please contact
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8684R
Rulings of the Tax Commissioner