Tax Type
Retail Sales and Use Tax
Description
Computer, Services, and Software
Topic
Taxability of Persons and Transactions
Date Issued
12-15-1999
December 15, 1999
Re: Sec. 58.1-1821 Application: Retail Sales and Use Tax
Dear****:
This is in response to your letter seeking correction of the consumer use tax audit assessment issued to and previously paid by ***** (the Taxpayer). I apologize for the delay in responding to your letter.
FACTS
The Taxpayer is a mortgage lender. An audit for the period October 1995 through September 1998 resulted in the assessment of use tax on untaxed data conversion fees charged by one vendor.
The Taxpayer uses this vendor to process loan data. The Taxpayer provides a data disk to the vendor every month with raw data on it. The vendor reads the raw data from the disk, processes it, and sends the newly-formatted data to the Taxpayer on a CD-ROM disc. The Taxpayer maintains that these transactions represent nontaxable services and, therefore, should not be treated as sales of tangible personal property. Accordingly, the Taxpayer requests abatement of the entire audit assessment.
DETERMINATION
For retail sales and use tax purposes, Code of Virginia Sec. 58.1-602 defines the term ``sale' to include ``the fabrication of tangible personal property for consumers who furnish, either directly or indirectly, the materials used in fabrication.' In general, the retail sales and use tax applies to the sale of any item of tangible personal property, including data processing software in tangible form, pursuant to Code of Virginia Secs.58.1-603 and 58.1-604.
Based on the above statutory provisions, it has been the established policy of the department that the conversion of data from one medium to another, or from one diskette to another diskette, constitutes taxable fabrication. This policy has been consistently applied as shown by the enclosed public documents (P.D.'s) 86-22 (1/16/86), 87-88 (2/27/87), and 96-222 (9/11/96). Also see Title 23 of the Virginia Administrative Code (VAC) 10-210-560, copy enclosed.
Accordingly, the processing or conversion fees assessed in this audit are properly subject to the retail sales and use tax. Therefore, I find no basis for revising the audit assessment and refunding the tax and interest paid.
If you have any questions about this determination, please contact ***** of my Tax Policy staff at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/20552R
Re: Sec. 58.1-1821 Application: Retail Sales and Use Tax
Dear****:
This is in response to your letter seeking correction of the consumer use tax audit assessment issued to and previously paid by ***** (the Taxpayer). I apologize for the delay in responding to your letter.
FACTS
The Taxpayer is a mortgage lender. An audit for the period October 1995 through September 1998 resulted in the assessment of use tax on untaxed data conversion fees charged by one vendor.
The Taxpayer uses this vendor to process loan data. The Taxpayer provides a data disk to the vendor every month with raw data on it. The vendor reads the raw data from the disk, processes it, and sends the newly-formatted data to the Taxpayer on a CD-ROM disc. The Taxpayer maintains that these transactions represent nontaxable services and, therefore, should not be treated as sales of tangible personal property. Accordingly, the Taxpayer requests abatement of the entire audit assessment.
DETERMINATION
For retail sales and use tax purposes, Code of Virginia Sec. 58.1-602 defines the term ``sale' to include ``the fabrication of tangible personal property for consumers who furnish, either directly or indirectly, the materials used in fabrication.' In general, the retail sales and use tax applies to the sale of any item of tangible personal property, including data processing software in tangible form, pursuant to Code of Virginia Secs.58.1-603 and 58.1-604.
Based on the above statutory provisions, it has been the established policy of the department that the conversion of data from one medium to another, or from one diskette to another diskette, constitutes taxable fabrication. This policy has been consistently applied as shown by the enclosed public documents (P.D.'s) 86-22 (1/16/86), 87-88 (2/27/87), and 96-222 (9/11/96). Also see Title 23 of the Virginia Administrative Code (VAC) 10-210-560, copy enclosed.
Accordingly, the processing or conversion fees assessed in this audit are properly subject to the retail sales and use tax. Therefore, I find no basis for revising the audit assessment and refunding the tax and interest paid.
If you have any questions about this determination, please contact ***** of my Tax Policy staff at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/20552R
Rulings of the Tax Commissioner