Tax Type
Retail Sales and Use Tax
Description
Services; Professional or personal; Provision of information via microfiche and computer tapes
Topic
Taxability of Persons and Transactions
Date Issued
07-26-1996
July 26, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear****************
This will reply to your letter of May 17, 1996 in which you request a ruling as to the sales and use tax application to data processing services performed by ***********(the "Taxpayer").
FACTS
The Taxpayer performs data processing services for Virginia clients. The Taxpayer's clients are banks, credit unions, mortgage companies and related industries in the business of servicing single family mortgage loans. All processing and related services are generated from the Taxpayer's Florida headquarters and received through CRTs at the client's location. Taxpayer's clients are billed for the data processing services based on how many loans they have on the Taxpayer's system.
Clients also have the option of receiving information by way of microfiche. When a client requests a microfiche copy of information, the microfiche is billed separately from the monthly service charge for the CRT access. The microfiche invoice is broken down between original and copies. The Taxpayer is requesting a ruling on the sales tax application to the sale of microfiche to Virginia customers.
The Taxpayer's clients also have the option of obtaining requested information on computer data tapes. These tapes are either sent to the client, or a third party at the clients request. Clients are charged $25 for each nonreturnable tape. Clients are billed separately for the tapes on an invoice which breaks down where each tape was sent. The Taxpayer is also requesting a ruling on the sales tax application to the sale of computer tapes to Virginia customers.
It should be pointed out that all information furnished by means other than CRT is customer specific containing only the information requested by the customer.
RULING
Code of Virginia § 58.1-609.5(1) provides for a sales and use tax exemption for, "professional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made, nor services rendered by repairmen for which a separate charge is made." Virginia Regulation (VR) 630-10-97.1 (copy enclosed), addresses "services" and discusses the "true object" test for determining whether a transaction represents a taxable sale of tangible personal property or a nontaxable sale of a personal or professional service.
Based on the information provided in your letter, Code of Virginia § 58.1-609.5(1), and the regulation cited above, it is apparent that the "true object" of the information transmittal via CRT is clearly a tax exempt service provided by the Taxpayer. Likewise, it has been the longstanding policy of the department that when information, such as the type provided by the Taxpayer, is transferred by means of microfiche, computer tape, hardcopy, etc., the "true object" of the transaction is the obtaining of the information, not the tangible personal property by which the information is transferred. It is only when the customer requests multiple copies of reports that a taxable transaction occurs. The Taxpayer is required to collect tax on all additional copies of reports furnished to customers.
I have enclosed an R-1, Certificate of Registration, for your convenience in registering for collection of the Virginia retail sales and use tax. If you should have any further questions, please contact******Office of Tax Policy, at**********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11249K
Rulings of the Tax Commissioner