Tax Type
Retail Sales and Use Tax
Description
Insurance companies; Video tapes
Topic
Taxability of Persons and Transactions
Date Issued
01-09-1995
January 9, 1995
Re: Request for Ruling: Retail Sales and Use Tax
Dear*************
This will reply to your letter of November 28, 1994 in which you request a ruling on the application of the sales and use tax to certain activities conducted by ***********(the "Taxpayer" ) .
FACTS
The Taxpayer's primary business involves the documentation, for insurance purposes, of personal property inventory. The documentation of the property is accomplished by the Taxpayer's visitation to the property and its recording of the property on video tape. In returning its findings to the customer the Taxpayer submits its report via the video tape.
You provide that the video tape is an inconsequential element of the transaction and request a ruling as to the taxability of the charge for documentation of the property which includes the video tape.
RULING
Code of Virginia §58.1-609.5(1 ) provides an exemption from the sales and use tax for "[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made..." In order to determine whether a particular transaction which involves both the rendering of a service and the provision of tangible personal property constitutes an exempt service or a taxable retail sale, the "true object" of the transaction must be examined. See Virginia Regulation (VR) 630-10-97.1 (copy enclosed).
Based on the information provided, and consistent with the department's determination in P.D. 86-216 (11/03/86), copy enclosed, the "true object" of your transactions are the services rendered, rather than the tangible personal property used to convey the information. Therefore, the charges to your customer are not taxable. Please note, however, that as a provider of a service, your company is subject to payment of the use tax on the purchase of the video tapes used in the above transactions.
If you have any additional questions regarding this matter, please contact the department.
Sincerely
Danny M. Payne
Tax Commissioner
OTP/8849Q
Rulings of the Tax Commissioner