Tax Type
Retail Sales and Use Tax
Description
Manufacturing, processing, assembling, or refining; Music
Topic
Taxability of Persons and Transactions
Date Issued
01-17-1995
January 17, 1995
Re: Ruling Request: Sales and Use Taxes
Dear*********************
This will reply to your letter dated December 1, 1994 in which you request a ruling on whether certain equipment purchased and used by *************** (the "Taxpayer") is exempt from sales and use tax.
FACTS
In addition to manufacturing percussion mallets, the Taxpayer, as a part of its music accessory business, arranges music. This culminates in the creation of sheet music (and sample cassette recordings) for sale to concert bands. In its music arranging activity, the Taxpayer uses a controller to lay down recorded tracks, and also uses a number of devices, such as mixers, routers, automated control modules, tone generators, printers, compressors, speakers, amps, and recorders. All of these devices are integrated through a computer, using computer software called Musical Instrument Digital Interface (MIDI). The Taxpayer asserts that all devices and equipment used to create the sheet music and recorded music are manufacturing "tools" and as such may be purchased exempt from the tax.
RULING
Code of Virginia §58.1-608(1) permits an exemption from the sales and use tax for "machinery or tools or repair parts thereof or replacements thereof, fuel, power, energy, or supplies, used directly in . . . manufacturing . . . products for sale or resale." The Virginia Supreme Court has interpreted this exemption as applying only to businesses manufacturing products for sale or resale "in the industrial sense." See Golden Skillet v. Commonwealth. 214 Va. 276, 199 S.E.2d 511 (1973).
Code of Virginia § 58.1-602(9) defines businesses that manufacture products "in the industrial sense" as including, but not limited to, those "classified in codes 10 through 14 and 20 through 39 published in the Standard Industrial Classification Manual." The Taxpayer's music arranging activity falls into SIC code 8999.
The musical arranging activity begins with laying down musical tracks, and ends with printing a final piece of sheet music. Musical arranging is clearly not manufacturing in the industrial sense, nor does the SIC code for this activity fall within those enumerated by the Code of Virginia. Therefore, equipment purchased for use in this endeavor is not exempt from the use tax.
If you have further questions regarding the taxability of equipment purchased for use in your business operations, please do not hesitate to write or call.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9020G
Rulings of the Tax Commissioner