Tax Type
Retail Sales and Use Tax
Description
Advertising; Printed materials used in in-house advertising.
Topic
Taxability of Persons and Transactions
Date Issued
05-20-1998
May 20, 1998
Dear*************:
This will reply to your letter in which you, on behalf of ***** (the ``Taxpayer'), request a ruling on the application of sales and use tax to the purchase of printed promotional materials.
FACTS
The Taxpayer manufactures windows and other building materials. The Taxpayer uses point-of-purchase sales displays to promote its windows and wishes to know if the displays qualify for the printed materials exemption found in Code of Virginia Sec. 58.1-609.6(4). The displays are given to the Taxpayer's retail distributors and are set up in retail stores.
The Taxpayer sponsors a race team and purchases printed materials to promote the race team and the Taxpayer's name. Calendars, signature cards containing the Taxpayer's logo, a picture of the driver and the race car, and race schedules are examples of the promotional printed materials purchased by the Taxpayer. These items are given to the Taxpayer's retail distributors for distribution to their customers. The Taxpayer wishes to know if the printed racing materials qualify for exemption from the sales and use tax.
RULING
Code of Virginia Sec. 58.1-609.6(4) provides an exemption from sales and use tax for ``[c]atalogs, letters, brochures, reports, and similar printed materials, except administrative supplies, . . . when stored for twelve months or less in the Commonwealth and distributed for use without the Commonwealth.' Title 23 of the Virginia Administrative Code (VAC) 10-210-3010(H) provides a list of exempt printed items which includes the following:
Racing Calendars, Schedules, and Signature Cards
The racing calendars, race schedules, and signature cards are used by the Taxpayer for external promotional purposes. Based on the exemption for printed materials cited above, these items qualify for exemption if stored for twelve months or less in Virginia and distributed for use outside this state. Any materials that are distributed in Virginia or remain in the state longer than twelve months are taxable. The Taxpayer should accrue use tax on taxable printed materials if the sales tax is not paid at the time of purchase.
Point-of-Purchase Displays
The components of the Taxpayer's point-of-purchase displays are purchased from various vendors and assembled by the Taxpayer. Each display consists of a frame which supports and displays printed graphics describing the Taxpayer's products, pockets to hold printed brochures, product information tear sheets, and a window unit. The windows are withdrawn from the Taxpayer's inventory and mounted in the display.
The printed components of the Taxpayer's point-of-purchase displays, such as the brochures, tear sheets, and the graphics, are clearly included in the exempt items listed in 23 VAC 10-210-3010(H). The display racks are also considered exempt because the printed materials cannot be displayed without some means of support. However, I cannot agree that the window units constitute printed materials as envisioned by the printed materials exemption. Therefore, the window units do not qualify for the printed materials exemption.
The Taxpayer makes a taxable use of the window units by withdrawing the windows from its inventory, placing the windows in the sales displays, and giving the displays to retailers. Based on the statute cited, the Taxpayer is required to treat such withdrawals as taxable sales and remit the applicable amount of tax to the department.
Notepads
An auditor from the department that recently completed an audit of the Taxpayer has inquired whether purchases of notepads containing the Taxpayer's logo qualify for the printed materials exemption. If the notepads are distributed outside Virginia and held for twelve months or less in Virginia, the printed materials exemption would apply to purchases of the notepads. This is consistent with the department's treatment of the racing materials previously discussed. If the notepads are used as an administrative supply by the Taxpayer, the purchase of the notepads is taxable in accordance with Title 23 VAC 10-21Q-3010(H) and Code of Virginia Sec. 58.1-609.6(4).
I trust the foregoing has addressed your questions. If you have any questions concerning this ruling, please contact ***** at *****.
Dear*************:
This will reply to your letter in which you, on behalf of ***** (the ``Taxpayer'), request a ruling on the application of sales and use tax to the purchase of printed promotional materials.
FACTS
The Taxpayer manufactures windows and other building materials. The Taxpayer uses point-of-purchase sales displays to promote its windows and wishes to know if the displays qualify for the printed materials exemption found in Code of Virginia Sec. 58.1-609.6(4). The displays are given to the Taxpayer's retail distributors and are set up in retail stores.
The Taxpayer sponsors a race team and purchases printed materials to promote the race team and the Taxpayer's name. Calendars, signature cards containing the Taxpayer's logo, a picture of the driver and the race car, and race schedules are examples of the promotional printed materials purchased by the Taxpayer. These items are given to the Taxpayer's retail distributors for distribution to their customers. The Taxpayer wishes to know if the printed racing materials qualify for exemption from the sales and use tax.
RULING
Code of Virginia Sec. 58.1-609.6(4) provides an exemption from sales and use tax for ``[c]atalogs, letters, brochures, reports, and similar printed materials, except administrative supplies, . . . when stored for twelve months or less in the Commonwealth and distributed for use without the Commonwealth.' Title 23 of the Virginia Administrative Code (VAC) 10-210-3010(H) provides a list of exempt printed items which includes the following:
-
-
- Greeting cards, brochures, menus, calendars, datebooks, desk reminders, appointment books, art prints, and posters for external promotional purposes; and [p]rinted point-of-purchase sales devices, including display racks, animated and action pieces, posters and banners.
-
Racing Calendars, Schedules, and Signature Cards
The racing calendars, race schedules, and signature cards are used by the Taxpayer for external promotional purposes. Based on the exemption for printed materials cited above, these items qualify for exemption if stored for twelve months or less in Virginia and distributed for use outside this state. Any materials that are distributed in Virginia or remain in the state longer than twelve months are taxable. The Taxpayer should accrue use tax on taxable printed materials if the sales tax is not paid at the time of purchase.
Point-of-Purchase Displays
The components of the Taxpayer's point-of-purchase displays are purchased from various vendors and assembled by the Taxpayer. Each display consists of a frame which supports and displays printed graphics describing the Taxpayer's products, pockets to hold printed brochures, product information tear sheets, and a window unit. The windows are withdrawn from the Taxpayer's inventory and mounted in the display.
The printed components of the Taxpayer's point-of-purchase displays, such as the brochures, tear sheets, and the graphics, are clearly included in the exempt items listed in 23 VAC 10-210-3010(H). The display racks are also considered exempt because the printed materials cannot be displayed without some means of support. However, I cannot agree that the window units constitute printed materials as envisioned by the printed materials exemption. Therefore, the window units do not qualify for the printed materials exemption.
-
- Code of Virginia Sec. 58.1-623(C) states that:
-
- If a taxpayer . . . makes any use of the property other than an exempt use or retention, demonstration, or display while holding property for resale, . . . such use shall be deemed a taxable sale by the taxpayer as of the time the property or service is first used by him, and the cost of the property to him shall be deemed the sales price of such retail sale.
The Taxpayer makes a taxable use of the window units by withdrawing the windows from its inventory, placing the windows in the sales displays, and giving the displays to retailers. Based on the statute cited, the Taxpayer is required to treat such withdrawals as taxable sales and remit the applicable amount of tax to the department.
Notepads
An auditor from the department that recently completed an audit of the Taxpayer has inquired whether purchases of notepads containing the Taxpayer's logo qualify for the printed materials exemption. If the notepads are distributed outside Virginia and held for twelve months or less in Virginia, the printed materials exemption would apply to purchases of the notepads. This is consistent with the department's treatment of the racing materials previously discussed. If the notepads are used as an administrative supply by the Taxpayer, the purchase of the notepads is taxable in accordance with Title 23 VAC 10-21Q-3010(H) and Code of Virginia Sec. 58.1-609.6(4).
I trust the foregoing has addressed your questions. If you have any questions concerning this ruling, please contact ***** at *****.
Rulings of the Tax Commissioner