February 12, 2025
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the “Taxpayer”) in which you seek correction of the retail sales and use tax assessment issued for the period May 2017 through April 2020.
FACTS
An audit was conducted on the books and records of the Taxpayer, an insurance provider with multiple locations in Virginia, for the period at issue. As a result of a first-generation audit, the Taxpayer was assessed use tax on its purchase of direct mail services from an out-of-state vendor. The Taxpayer filed an application for correction contending that the exceptions for direct mail services were exempt advertising.
DETERMINATION
Virginia Code § 58.1-609.6 5 provides that the retail sales and use tax shall not apply to advertising. Virginia Code § 58.1-602 defines advertising as:
…the planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting and other media, including, without limitation, the providing of concept, writing, graphic design, mechanical art, photography and production supervision. Any person providing advertising as defined in this section shall be deemed to be the user or consumer of all tangible personal property purchased for use in such advertising. [Emphasis added.]
Title 23 of the Virginia Administrative Code (VAC) 10-210-40 defines the term “media” to include “newspapers, magazines, billboards, direct mail, radio, television, and other modes of communication.” [Emphasis added.] In addition, Title 23 VAC 10-210-41 A provides that:
The tax does not apply to charges by an advertising business for professional services in the planning, creating or placing of advertising in newspapers, magazines, billboards, direct mail, radio, television, or other media regardless of how such charges are computed by the advertising business and whether or not such business actually places the advertising in the media.
In Public Document (P.D.) 93-41 (3/4/1993), the Department concluded that a tax was erroneously assessed against a mail order company that had catalogs printed in another state and mailed by the printer to customers and potential customers within Virginia because it made no use of the catalogs in Virginia. See also P.D. 10-72 (5/18/2010).
In the present case, the Taxpayer provided a potential customer list to a vendor, which created, printed, and mailed marketing material to potential small company customers and independent brokers in Virginia. Because the Taxpayer neither mailed nor had use of the printed materials in Virginia, it was not subject to sales and use tax on the charges for the service.
Based upon this determination, the exceptions for the purchases of direct mail advertising provided by the out-of-state vendor will be removed from the audit. The audit will be returned to the appropriate field audit staff for adjustment. The Taxpayer has paid the assessment in full. Once the revisions to the audit are complete, a revised report and a refund will be issued for any overpayment along with any refund interest as applicable.
The Code of Virginia sections and regulations cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If there are any questions regarding this determination, please contact ***** in the Department’s Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at *****, or via email at *****@tax.virginia.gov.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR\4653.F