Tax Type
Retail Sales and Use Tax
Description
Publishing and broadcasting; Administrative rulings and court decisions
Topic
Taxability of Persons and Transactions
Date Issued
06-07-1996
June 7, 1996
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear**************
This is in reply to your letter in which you seek correction of a sales and use tax assessment issued to *******(the "Taxpayer") for the period August 1991 through July 1994.
FACTS
The Taxpayer publishes information related to public utility regulation. The publications produced by the Taxpayer are sold on a subscription basis and include hard cover books, paperback preprints, and CD-ROM disks; the information is also offered through on-line computer services. The publications contain the full text of selected regulatory commission decisions, abstracts of selected court and regulatory commission decisions, news summaries, and articles written by the Taxpayer's staff and by outside experts on public utility regulation.
The Taxpayer contests the tax assessed on purchases of administrative rulings and court decisions from various state public utility commissions. The Taxpayer maintains that these purchases are used directly to produce exempt publications and, therefore, are exempt from the tax under Code of Virginia § 58.1-609.3(2)(v).
DETERMINATION
Code of Virginia § 58.1-609.3(2)(v) provides an exemption from the retail sales and use tax for equipment, printing or supplies used directly to produce a publication described in §58.1-609.6(3), whether it is ultimately sold at retail or for resale or distribution at no cost. The term "used directly" is defined in Virginia Regulation (VR) 630-10-63(B)(2) as "those activities that are an integral part of the production of a product."
The information provided indicates that the Taxpayer purchases copies of documents, scans or keys the documents into a computer and then edits the material. A paper copy or disk is created and sent to a printer, where a camera ready copy of the document is made. The Taxpayer's purchases of printed material for incorporation into its publications is considered a preproduction activity, as the printed material is used before the start of the actual printing process to prepare materials for production. The department's long-standing policy is that preproduction activities are taxable because they are not an immediate part of actual production. In Public Document (P.D.) 85-118 (6/6/85), copy enclosed, the department ruled that items used in the taxpayer's newspaper plant, while an essential part of the production and printing process, were not used as an immediate part of actual production. The printed copies of regulatory decisions purchased by the Taxpayer are analogous to the items in P.D. 85-118; the copies are essential to production of the Taxpayer's publications but are not used in actual production.
Furthermore, VR 630-10-73 provides that the purchase of printed material other than newspapers, magazines, and other publications and material distributed with or as a part of such items is subject to the tax unless otherwise specifically exempted. Code of Virginia § 58.1-609.6(3) describes an exempt publication as one which is "issued daily, or regularly at average intervals not exceeding three months, and advertising supplements and any other printed matter ultimately distributed with or as part of such publications...." Based on the information provided, the materials purchased by the Taxpayer do not qualify as exempt publications under the statute or regulation and, therefore, are subject to the tax.
The tax assessed on the Taxpayer's purchases of administrative rulings and court decisions has been paid in full. Based on the foregoing, the tax was properly paid and no refund is due.
If you have any questions regarding this matter, you may contact****** at ********* .
Sincerely,
Danny Payne
Tax Commissioner
OTP/8725F
Rulings of the Tax Commissioner