Tax Type
Retail Sales and Use Tax
Description
Deficiency assessments, established policy on typesetting transactions
Topic
Collection of Delinquent Tax
Date Issued
06-09-1999
June 9, 1999
Re: Request for Ruling: Retail Sales and Use Tax
Dear**************
In your letter of May 25, 1999, you request a ruling on the application of the retail sales and use tax to typesetting and designing charges paid by the (the "Taxpayer'). Copies of cited sources are enclosed.
FACTS
The Taxpayer engaged a typesetter to design and produce a booklet. The typesetting product is a returnable computer disk which is provided to a printer to use in making printing plates. The printer produces the finished booklet. The Taxpayer maintains that the transaction is for exempt services and therefore questions whether the sales tax applied by the typesetter on the entire amount charged is proper.
DETERMINATION
Title 23 of the Virginia Administrative Code (VAC) 10-210-6020 sets forth the application of the sales and use tax to typesetting transactions. In subsection C, this regulation provides the following:
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- The sale of typesetting products is the sale of tangible personal property. The tax is computed upon the total charge for typesetting, including any charges for services connected with the sale. All typesetting operations must register as dealers. In addition, they must collect the tax from their customers, and remit the tax to the department unless the customer furnishes a valid exemption certificate, as provided in 23 VAC 10-210-280. [Emphasis added.]
- The sale of typesetting products is the sale of tangible personal property. The tax is computed upon the total charge for typesetting, including any charges for services connected with the sale. All typesetting operations must register as dealers. In addition, they must collect the tax from their customers, and remit the tax to the department unless the customer furnishes a valid exemption certificate, as provided in 23 VAC 10-210-280. [Emphasis added.]
In the transaction at issue, possession of a tangible encoded disk is transferred to the Taxpayer for a consideration. As this is analogous to the lease or rental of tangible personal property, the transaction constitutes the sale of tangible personal property, no matter how momentary the transfer. The taxation of returnable software products has been consistently applied by the department; see Public Documents (P.D.) 82-124 (9/10/82) and 96-131 (6/13/96).
In addition, Code of Virginia § 58.1-602 defines "sales price' 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.] Accordingly, all services are subject to taxation when provided in connection with the sale of tangible personal property, except for those services specifically exempted by statute. However, designing services are not specifically exempted from taxation when furnished in connection with the sale of tangible personal property.
Of final importance, the fees at issue do not qualify for the resale or industrial manufacturing exemptions since the disk is not resold and the Taxpayer is not an industrial manufacturer making direct use of the disk in its own industrial manufacturing process. Although the printer is entitled to the industrial manufacturing exemption, the printer has not purchased, leased, or rented the typesetting disk. Therefore, the printer's exemption is not applicable to the charges at issue. Based on the foregoing and the well established policy on typesetting transactions, the Taxpayer was correctly charged sales tax by its typesetting supplier on the charge at issue.
If you have any questions, please feel free to contact ***** of my tax policy staff at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/23011R
Rulings of the Tax Commissioner