Tax Type
Retail Sales and Use Tax
Description
"True Object" of Audio Video Presentation
Topic
Taxability of Persons and Transactions
Date Issued
03-07-1996
March 7, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear************************
This will reply to your letter of September 28, 1995 in which you request a reconsideration of my prior ruling (P.D. 95-234) on the tax status of various audio-visual transactions purchased by *******(the"Taxpayer"). More specifically, you are requesting a reconsideration of my determination as it relates to a video presentation to be prepared and shown at the Taxpayer's annual meeting.
FACTS
The Taxpayer hires a company to prepare and present a video presentation during the Taxpayer's annual meeting. The presentation will be made only once. In making the video the company will videotape various activities taking place and various objects at the Taxpayer's location, lease various pieces of equipment, and purchase specialized services from service providers such as directors, camera operators, etc. The company will bill the Taxpayer a lump sum for the presentation and tape, but will separately state on the sales invoice charges for the following: scripting, equipment leases, pre-production and production services, reimbursements for travel, the tape, etc.
The Taxpayers request for reconsideration is two-fold. First, the Taxpayer feels that the "true object" of this transaction is the service being provided by the company preparing and presenting the tape at the annual stockholders meeting. This argument is based on the fact that the film company is the entity that is actually preparing and presenting the tape, and also the fact that the presentation will only be made once.
Secondly, the Taxpayer feels that should the department find that the "true object" of this transaction is the actual tape, based on the nature of the Taxpayers stockholders, the tape would fall under the sales and use tax exemption afforded in Code of Virginia § 58.1-609.6(6). The Taxpayer operates as a cooperative, therefore, distinguishes itself and its stockholders from those of a publicly held corporation. More specifically, the Taxpayer claims that their stockholders are also their customers, therefore the purpose of the video presentation at the stockholders meeting is used as a marketing tool and should fall under the audio-visual exemption as commercial exhibition.
RULING
You suggest that the "true object" of the above situation is to obtain the professional services of the company and thus the total charge for the presentation and tape is exempt from the tax. However, the department traditionally has held that while the production of a videotape includes personal services, the true object of the transaction is the tape itself. (See P.D. 93-87 (3/29/93), copy enclosed.) Thus, although the company may separately state on the invoice charges for the various services and items of tangible personal property provided, the entire charge is taxable.
This is true even under the new exemption found in Code of Virginia § 58.1-609.6(6). The department has interpreted this exemption, which became effective July 1, 1995, as applying to feature film, program, and documentary producers, audiovisual production companies, and others engaged in the production of tapes for licensure, distribution, commercial exhibition, broadcast, or for use in the production of another exempt work. The exemption does not extend to producers of tapes and films intended for other than commercial distribution, such as in-house training tapes and corporate pieces. (See P.D. 95-198 (7/31/95) and Tax Bulletin 95-5, copies enclosed.) Although the videotape will be shown to the Taxpayer's numerous shareholders whom you also suggest are its customers and the presentation is made in a large exhibition hall, I do not find that the tape will be commercially exhibited as envisioned by the exemption. Thus, notwithstanding the new exemption, the total charges made by the company for the tape and presentation are taxable.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10296K
Rulings of the Tax Commissioner