Tax Type
Retail Sales and Use Tax
Description
Printing; Laser personalization.
Topic
Taxability of Persons and Transactions
Date Issued
02-05-1998
February 5, 1998
Dear *********:
This will reply to your letter in which you seek correction of the retail sales and use tax audit of ***** (the "Taxpayer') for the period of May 1991 through December 1995.
FACTS
The Taxpayer is an advertising agency specializing in creating direct mail packages for contribution campaigns. The Taxpayer creates the contribution packages and purchases the direct mail services from an outside vendor. The Taxpayer provides all paper stock to the outside vendor and the vendor may perform data manipulation, laser personalization, envelope stuffing and mail shop services, or any combination of the these services, to the Taxpayer. The Taxpayer, being an advertising agency, was audited and assessed tax on the purchase of direct mail advertising. The Taxpayer takes the position that they are purchasing the services provided by the outside vendor and such services would not be subject to the tax.
DETERMINATION
Code of Virginia Sec. 58.1-609.5 provides a sales and use tax exemption for the "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.' In order to determine whether a particular transaction which involves both the rendering of a service and the provision of tangible personal property constitutes an exempt service or a taxable sale, the "true object' of the transaction must be examined. See 23 Virginia Administrative Code (VAC) 10-210-4040 (copy enclosed).
Based on a recent ruling of the department, see P.D. 97-387 (9/25/97) enclosed, the taxable status of laser personalization services depends on the facts and circumstances surrounding the provision of printed material to the customer. In P.D. 97-387, the laser personalization printing was performed on customer provided letterhead or paper stock. Based on the facts in that case, the department determined the true object of the transaction was the provision of an exempt service. The laser personalization printing company did not provide any tangible personal property to the customer. The ruling noted that if the person performing the laser personalization provides the actual letterhead or paper stock in addition to the printing services, they would be considered to be selling tangible personal property and would be required to charge the tax on the total charge, including any services provided.
Based on the information provided in your letter, the Taxpayer in this case provides the paper stock or letterhead to the outside vendor. The outside vendor performed laser personalization services; no tangible personal property was sold to the Taxpayer. This being the case, based on P.D. 97-387 enclosed, I find that the true object of the transactions in question between the Taxpayer and the vendor is the provision of exempt services and should be exempt from the tax. An auditor from the District Office will contact the Taxpayer to make the necessary revisions.
If you should have any questions, please contact ***** Office of Tax Policy, at *****.
Rulings of the Tax Commissioner