Tax Type
Retail Sales and Use Tax
Description
Advertising; Media advertising
Topic
Taxability of Persons and Transactions
Date Issued
04-24-1996
April 24, 1996
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear**************
This will reply to your letter of August 8, 1995 in which you seek correction of the sales and use tax audit of ***** (the "Taxpayer") for the period of June 1989 through May 1995.
FACTS
The Taxpayer is a marketing consultant in the business of advertising and public relations. The Taxpayer was audited and assessed tax on the purchase of materials used in media advertising. More specifically, the materials in question were used to produce a catalog used for recruitment purposes by a private nonprofit Virginia school. The Taxpayer takes the position that the catalog does not qualify as media advertising, but instead qualifies as the sale of tangible personal property, thus rendering the sale exempt as a sale to a nonprofit institution of learning. The Taxpayer is requesting that the material used in producing the catalog be removed from the audit purchases sample.
DETERMINATION
"Advertising" is defined in Code of Virginia § 58.1-602 as:
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- the planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting and other media, including, without limitation, the providing of concept, writing, graphic design, mechanical art, photography and production supervision. Any person providing advertising as defined herein shall be deemed to be the user or consumer of all tangible personal property purchased for use in such advertising.
Virginia Regulation (VR) 630-10-3 (copy enclosed) provides for the department's interpretation of advertising and defines "media" to include "newspapers, magazines, billboards, direct mail, radio, television, and other modes of communications." The department's regulation defines the term "media" very broadly to include products created by an advertising business for its client for dissemination to the general public. To determine if a particular mode of communication developed by an advertising business qualifies for tax exemption as "media advertising", it is necessary to determine whether the communication mode is intended to convey promotional information to the public generally. See P.D. 88-304 (10/31/88), copy enclosed.
Based on all of the foregoing, the catalogs produced by the Taxpayer are classified as media advertising. As stated in your letter, the catalog contains "marketing references" to promote the school to prospective students. Furthermore, the catalog is used by college admissions officials who make decisions on admitting the school's graduates; the catalog promotes the curriculum, faculty and activities of the school.
As provided under Code of Virginia § 58.1-602, any person providing media advertising is the user and consumer of all tangible personal property incorporated in such advertising and must pay the tax on the purchase thereof. Likewise, the sale of media advertising to the final consumer is not a taxable event. Please find enclosed copies of P.D. 92-253 and P.D. 87-203 which further substantiate the department's position with respect to media advertising.
VR 630-10-3.2(C) addresses the billing by an advertising business for media advertising created by them. This section provides, in part, "the tax does not apply to the total charge made by an advertising business for the creation of advertising in the media...." In accordance with the regulation, the sale of the catalogs by the Taxpayer to the nonprofit school is not a taxable transaction.
Because the catalog qualifies as "media advertising", and the Taxpayer is the taxable user of all tangible personal property for use in such advertising, there is no basis to adjust the assessment. If you should have any further questions, please contact ***Office of Tax Policy, at*******.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10137K
Rulings of the Tax Commissioner