Tax Type
Retail Sales and Use Tax
Description
Mailhouse facility
Topic
Taxability of Persons and Transactions
Date Issued
06-28-1984
June 28, 1984
Re: Ruling Request: Sales and Use Tax
Dear *******************
This will reply to your letter of June 25, 1984 and will reference your June 22, 1984 meeting with representatives of the department in which you request a ruling on the applicability of the sales and use tax to your client's operations.
Facts
Your client, Company X, proposes to operate a mailhouse facility within Virginia for the purpose of distributing mail packages (which are not exempt under any provision of the sales and use tax statutes). These mail packages will ultimately be distributed nationally to the customer's donees. A substantial portion of X's business is pursuant to contracts with various agencies, located both within and without Virginia. Customers (also located within and without Virginia) contract with these agencies to produce a mail package. The agencies then contract with a printer who prints the package and delivers it to either the agency or to the mailhouse with whom the agency has contracted for processing and distribution by mail. The agency's customer is then billed by the mailhouse and the printer, but all invoices pass through the agency which guarantees payment.
Ruling
Va. Code §58-441.4 imposes a sales tax on the sale at retail within Virginia of tangible personal property. The term "sale" is defined by Va. Code §58-441.2(b) as "any transfer of title or possession or both . . . of tangible personal property." In the instant transaction, the purchase of printing by the customer is a nontaxable event because the material being purchased is for resale by the agency to the customer, and is thus excluded from the definition of a "retail sale." The subsequent delivery of the material by the printer to a mailhouse is equivalent to the delivery of the material back to the agency since the mailhouse is acting as the agency's agent, processing and mailing the materials pursuant to the agency's instructions. The same is true when the agency delivers the printed matter to the mailhouse, i.e., the delivery is equivalent to the delivery to the agency itself.
The second question therefore centers around where the taxable sale between the agency and its customers occurs. The Virginia Supreme Court has held in WTAR Radio-TV Corp. v. Commonwealth, 217 Va. 877, 234 S.E.2d 245 (1977) that the showing on the air of a television advertisement was tantamount to delivery of the property to the purchaser of the advertisement, even though the purchaser did not have actual physical possession of the videotape. Utilizing the court's rationale in this case, delivery of the printed matter from the agency to the customer occurs with the delivery of the printed matter by the mailhouse to the post office, i.e., the customer obtains "constructive possession" of the mailing package. Therefore, when the mailhouse is located within Virginia, the customer receives constructive possession of the property within this state, and the agency, whether within or without Virginia, will be required to collect the sales tax on its charge to the customer. However, if the property is transported to another mailhouse outside of the state for further processing and mailing, the sale from the agency to the customer would be deemed to occur outside Virginia.
If you have any further questions, please let us know.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner