Tax Type
Retail Sales and Use Tax
Description
Printing; Mailing services.
Topic
Taxability of Persons and Transactions
Date Issued
02-23-1998
February 23, 1998
Dear****************
This will reply to your letter in which you seek correction of the retail sales and use tax audit of your client, ***** (the "Taxpayer'), for the period of September 1993 through August 1996.
FACTS
The Taxpayer is in the mailing service business. The majority of the Taxpayer's operation consists of bulk mailing services for direct mail marketing companies and advertising agencies. The Taxpayer also offers laser printing and press printing of letters, forms, envelopes and labels. The Taxpayer is taking exception to the application of tax to the sale of laser personalization printing, services in connection with the sale of tangible personal property, and the sale of labels. These issues will be discussed separately below.
DETERMINATION
Laser Personalization and Printing Services
Code of Virginia Sec. 58.1-609.5.1 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' and for 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 retail 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 customers. 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 Taxpayer 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. An auditor from our **************District Office will contact the Taxpayer and review the records to determine the Taxpayer's status based on this ruling.
Services
In situations where the Taxpayer provided various mail shop services in connection with the sale of tangible personal property, the Taxpayer segregated the services portion of the transaction on the invoice and did not charge tax on this portion of the bill. The Taxpayer is taking exception to the tax application to these services as the same transactions were not held taxable in the previous audit of the Taxpayer.
Due to the fact the Taxpayer was led to believe that they were invoicing and applying the tax correctly in the previous audit, I will remove these transactions from the current audit. For future reference, and in accordance with the enclosed regulation, the tangible personal property sold by the Taxpayer is considered the true object of the transaction and all services, whether separately stated or not, provided with the property would be taxable.
Mailing Labels
The Taxpayer also sells mailing labels. As in the previous audit, the Taxpayer has been paying sales tax on the purchase of all tangible personal property that goes into making and selling the labels as a tax exempt service. The Taxpayer is taking exception to the auditors application of tax to the sale of the labels as the sale of tangible personal properly.
Due to the fact the Taxpayer believed they were applying the tax correctly based on information provided in the previous audit, I will remove the sale of labels from the current audit. In the future, such transactions should be treated as the sale of tangible personal property and taxed accordingly.
Based on all of the above, the audit will be revised accordingly. If you should ***** have any questions, please call *****, Office of Tax Policy, at *****.
Dear****************
This will reply to your letter in which you seek correction of the retail sales and use tax audit of your client, ***** (the "Taxpayer'), for the period of September 1993 through August 1996.
FACTS
The Taxpayer is in the mailing service business. The majority of the Taxpayer's operation consists of bulk mailing services for direct mail marketing companies and advertising agencies. The Taxpayer also offers laser printing and press printing of letters, forms, envelopes and labels. The Taxpayer is taking exception to the application of tax to the sale of laser personalization printing, services in connection with the sale of tangible personal property, and the sale of labels. These issues will be discussed separately below.
DETERMINATION
Laser Personalization and Printing Services
Code of Virginia Sec. 58.1-609.5.1 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' and for 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 retail 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 customers. 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 Taxpayer 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. An auditor from our **************District Office will contact the Taxpayer and review the records to determine the Taxpayer's status based on this ruling.
Services
In situations where the Taxpayer provided various mail shop services in connection with the sale of tangible personal property, the Taxpayer segregated the services portion of the transaction on the invoice and did not charge tax on this portion of the bill. The Taxpayer is taking exception to the tax application to these services as the same transactions were not held taxable in the previous audit of the Taxpayer.
Due to the fact the Taxpayer was led to believe that they were invoicing and applying the tax correctly in the previous audit, I will remove these transactions from the current audit. For future reference, and in accordance with the enclosed regulation, the tangible personal property sold by the Taxpayer is considered the true object of the transaction and all services, whether separately stated or not, provided with the property would be taxable.
Mailing Labels
The Taxpayer also sells mailing labels. As in the previous audit, the Taxpayer has been paying sales tax on the purchase of all tangible personal property that goes into making and selling the labels as a tax exempt service. The Taxpayer is taking exception to the auditors application of tax to the sale of the labels as the sale of tangible personal properly.
Due to the fact the Taxpayer believed they were applying the tax correctly based on information provided in the previous audit, I will remove the sale of labels from the current audit. In the future, such transactions should be treated as the sale of tangible personal property and taxed accordingly.
Based on all of the above, the audit will be revised accordingly. If you should ***** have any questions, please call *****, Office of Tax Policy, at *****.
Rulings of the Tax Commissioner