Tax Type
Retail Sales and Use Tax
Description
Photographs; Travel expense reimbursement
Topic
Taxability of Persons and Transactions
Date Issued
05-06-1996
May 6, 1996
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear*************
This will reply to your letter of January 15, 1996 in which you seek correction of the sales and use tax audit assessment of ****** (the "Taxpayer") for the period of July 1992 through June 1995.
FACTS
The Taxpayer is in the manufacturing business. As the result of a sales and use tax audit, the Taxpayer was assessed tax on the purchase of a merchandising video. Copies of the video are distributed to the Taxpayer's retail distributors and are used as a point of sale merchandising tool to promote the Taxpayer's products. The Taxpayer takes the position that the video is media advertising and is not subject to the tax. In the event the department does not find the video to be media advertising, the Taxpayer is requesting that the cost of the video be held separately and not be included in the error extrapolation calculations.
The Taxpayer is also taking exception to the application of tax to travel expenses reimbursed to an advertising agency. The expenses were incurred when the advertising agency was hired to take pictures at the Taxpayer's national sales meeting. These expenses were separately invoiced and the Taxpayer feels they do not constitute the purchase of tangible personal property and are exempt.
DETERMINATION
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- "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, and the information provided in your letter, I find that the video in question qualifies as "media advertising". Provided the Taxpayer can provide documentation that the video was distributed to golf pro shops for use as a merchandising tool, I will agree to remove the video from the audit sample.
In regard to the reimbursement expenses in connection with the purchase of photographs, Virginia Regulation (VR) 630-10-82 (copy enclosed) provides that the sales and use tax applies to the sale of photographs. This regulation goes on to say that:
The tax is applicable to the total charge to the customer for a photograph, slide, etc., including, but not limited to, charges for labor, photocomposition, setting design, photography time, and any other components of the charge, regardless of whether such components are separately stated. (Emphasis added).
Based on the above, the department finds that the reimbursement expenses in connection with the purchase of photographs to be a taxable charge, whether separately invoiced or not.
Upon verification by the auditor of the actual usage of the video, the audit will be adjusted accordingly and a revised audit assessment will be forwarded to the Taxpayer. If you should have any questions, please contact *****Office of Tax Policy, at*******
.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10870K
Rulings of the Tax Commissioner