Tax Type
Retail Sales and Use Tax
Description
Advertising; Media advertising
Topic
Taxability of Persons and Transactions
Date Issued
06-10-1997
June 10, 1997
Re: Request for Ruling: Retail Sales and Use Tax
Dear***************
This is in reply to your letter faxed to the department on May 29, 1997, after speaking with a member of the Tax Policy Staff. You seek information on the application of the sales and use tax to ******** (the "Taxpayer").
FACTS
The Taxpayer is an advertising agency. On occasion, the Taxpayer provides artwork to a client for use in silk screening t-shirts. The Taxpayer provides the artwork and its client obtains the t-shirts and produces the end product. The Taxpayer requests a ruling regarding the application of the tax to its provision of artwork to the client.
RULING
Based on the limited information provided in your letter, it appears that the Taxpayer is providing creative and design services resulting in a tangible product for nonmedia or nonpromotional purposes. The department has previously addressed the provision of creative and design services by advertising agencies for both media and nonmedia purposes. See Public Documents (P.D.) 90-105 (7/3/90) and 94-199 (6/24/94), with attachments.
Consistent with the prior rulings, when the Taxpayer provides artwork to its client for use by the client in screen printing t-shirts for nonmedia purposes, the tax should be added to the total charge to the client. The Taxpayer may purchase under a resale certificate of exemption, Form ST-10, materials and supplies used in creating such artwork.
If, however, the Taxpayer provides artwork to its client for media or promotional purposes, the Taxpayer is providing an exempt advertising service. As such, the Taxpayer should not add the tax to the charge for the artwork provided to its client. The Taxpayer would be liable for the payment of the tax on all items purchased for use in the creation of such artwork.
It is my understanding that you have been mailed a copy of the department's updated regulations, including 23 VAC 10-210-40 which explains the application of the tax to advertising agencies. I am enclosing the cited public documents for your information.
I hope the foregoing has responded to your inquiry and should you have additional questions, you may contact **** at**********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12581J
Rulings of the Tax Commissioner