Tax Type
Retail Sales and Use Tax
Description
Photography; Videotape duplication
Topic
Taxability of Persons and Transactions
Date Issued
01-29-1997
January 29, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear*********
This is in response to your letter concerning the assessment of sales and use tax issued to ***** (the Taxpayer). I apologize for the delay in responding to your letter.
FACTS
The Taxpayer operates a video rental store renting video tapes, selling soft drinks and snacks, and copying customer-furnished video tapes (e.g., wedding tapes). An audit for the period February 1993 through January 1996 resulted in the assessment of sales and use tax on untaxed sales and purchases.
The only issue raised by the Taxpayer is the tax assessed on video transfer fees. Although it charges sales tax on blank video tapes, the Taxpayer claims that it was told by a former employee of the department in 1993 that video transfer fees were not taxable. The Taxpayer further maintains that these transfer fees are the same as charges for film developing, and that the tax should not be charged on the initial transfer but only on subsequent copies. The Taxpayer requests a reduction of at least 50% of the tax assessed on the video transfer fees.
DETERMINATION
Code of Virginia § 58.1-603 imposes the sales tax on the gross sales price of tangible personal property sold at retail in Virginia. "Sales price" is defined by Code of Virginia § 58.1-602 to mean "the total amount for which tangible personal property or services are sold, including any services that are a part of the sale...." Emphasis added.
With these statutes in mind, the department set out in P. D. 84-214 (10/31/84, copy enclosed) that the total charge for the conversion of home movies to videotapes, including tape, conversion or transfer services, labor and other overhead charges included in the total charge is taxable.
In addition, Code of Virginia § 58.1-602 defines "sale" as including "the fabrication of tangible personal property." In this regard, P. D. 86-22 (1/16/86, copy enclosed) sets out that the charge for the conversion of information from one diskette to another is deemed to constitute a taxable fabrication charge. The tax applies in the same manner to the video transfer fees charged by the Taxpayer. As such, the video transfer fees are subject to the tax regardless of whether such fees are separately stated on the customer's invoice or billed separately from the sale of a blank video tape, or the customer furnishes the blank video tape.
In P. D. 85-224 (12/13/85, copy enclosed), the department ruled that charges for film developing are subject to the tax when film developing services are provided in connection with the sale of photographs. This is the same result as with video transfer fees charged in connection with the sale of blank tapes.
Code of Virginia § 58.1-205 places the burden of proof upon the Taxpayer to show that an assessment of tax is erroneous. Unfortunately, the Taxpayer has not provided convincing evidence that it was misinformed. Accordingly, based on all of the foregoing, l find that the tax assessed on video transfer fees is proper.
Under separate cover, the Taxpayer will be mailed an updated bill for the outstanding balance. Payment of ******* should be sent to the attention of ******at the department's Office of Tax Policy, Post Office Box 1880, Richmond, Virginia 23218-1880, within the next 60 days.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11122R
Rulings of the Tax Commissioner