Tax Type
Retail Sales and Use Tax
Description
Price updates sent to customers via telephone line or magnetic tape
Topic
Exemptions
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
03-30-1995
March 30, 1995
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear***********
This will reply to your letter of January 13, 1995 in which you contest a sales and
use tax assessment to your company, **********(the"Taxpayer"), for the period October 1991 through September 1994.
FACTS
The Taxpayer is in the business of selling computers, peripheral equipment, computer supplies and related computer service applications to automobile, truck, motorcycle, industrial vehicle and agricultural equipment dealers. It makes available to its customers on a regular basis parts price updates either electronically via telephone lines or via magnetic tapes. When the information is provided by magnetic tape, the customer is charged a refundable deposit fee which is later returned to the customer for a full credit.
You contest the tax assessed with respect to charges billed to customers for information provided electronically via telephone lines and via magnetic tape. You contend that such charges are nontaxable charges for the provision of information services.
It is my understanding that the department previously audited the taxpayer and that upon reaudit it was found that the Taxpayer had not acted in accordance with the information previously provided by the auditor and through determination letters to the Taxpayer, P.D. 88-20 (114188) and P.D. 91-207 (916191), specifically with regard to the tax status of the parts price updates.
DETERMINATION
The department traditionally has held that the provision of information via electronic means is a nontaxable service. See VR 630-10-97.1, copy enclosed, which specifically addresses the tax status of information transferred via electronic means. Accordingly, the assessment will be revised to remove charges made in connection with this service.
However, as explained in VR 630-10-97.1, the prior determination letters to the Taxpayer and in other published documents on substantially the same issue, [see P.D. 91-161 (8/12/91), P.D. 91-187 (8/30/91) and P.D. 91-224 (9/23191), copies enclosed], the tax applies when standard information is provided to a customer in tangible form (e.g., paper, diskette, magnetic tape). In such situations and notwithstanding the fact that the customer may not necessarily permanently retain the tangible product conveying such information, a "sale" of tangible personal property occurs. "Sale" is defined in Code of Virginia §58.1-602 as "any transfer of title or possession. or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property...." (Emphasis added.)
Accordingly, the assessment will be revised as set forth herein and a revised Notice of Assessment will be mailed to the Taxpayer as soon as practicable.
As the department's policy with respect to this issue has been shared with the Taxpayer on numerous occasions, the department expects the Taxpayer to comply with the proper procedures henceforward. Should you have any questions about this matter, please contact*************.
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- Sincerely,
Danny M. Payne
Tax Commissioner
- Sincerely,
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OTP/9234H
Rulings of the Tax Commissioner