Tax Type
Retail Sales and Use Tax
Description
Books and publications; Packaging
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
07-01-1985
July 1, 1985
Re §58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply to your letter of March 27, 1985 on behalf of ***** (Taxpayer) for correction of an assessment in the above referenced case.
FACTS
Taxpayer is in the business of selling newspapers and magazines at retail. In connection with such sales of magazines and newspapers, Taxpayer operates a banding machine and uses other packaging materials to facilitate the allocation and delivery of such publications to various retail establishments. Taxpayer is also involved in the sale of books to public school groups and associations for book fair sales. Taxpayer claims that its banding machine and packaging materials qualify for the exemption from sales and use tax under §58.1-6O8(1)(c) or (d) of the Virginia Code, and that its sales of books to public schools should be exempt as either sales for resale, or sales to nonprofit public schools.
It is the department's understanding that Taxpayer is not directly involved in the publishing or printing of any of the publications it packages and sells. It is our further understanding that none of taxpayer's sales of books to public school groups were made pursuant to a resale exemption certificate.
DETERMINATION
§58.1-6O2(9) of the Virginia Code, defines manufacturing, processing, refining or conversion to include "the production line of [a] plant starting with the handling and storage of raw materials at the plant site and continuing through the last step of production where the product is finished or completed for sale and conveyed to a warehouse at the production site." Furthermore, this code section defines "manufacturing" to include those necessary ancillary activities of newspaper and magazine printing, "when such activities are performed by the publisher of any newspaper or magazine for sale daily or regularly at average intervals not exceeding three months."
Since taxpayer in the present case is not the publisher of the publications which it packages and delivers to its customers, the exemption in §58.1-6O2(9) is not available to exempt its packaging machinery and materials.
Section 58.1-608.1.d of the Code exempts from the sales and use tax, "materials, containers, labels, sacks, cans, boxes, drums or bags for future use for packaging tangible personal property for shipment or sale." Furthermore, §63O-10-26 of the Virginia Sales and Use Tax Regulations states in pertinent part, that "Packaging materials, such as containers, labels, etc....may be purchased tax exempt by wholesalers and retailers as purchases for resale, if the items are marketed with the product being sold and become the property of the purchaser."
Therefore, to the extent that the packaging materials described in the present case are marketed with the publications being sold, and become the property of taxpayers customers, they will be exempt from the sales and use tax. If taxpayer can provide the Technical Services Section of the Department with documentation, (within 30 days of this letter) detailing the extent to which such packaging materials meet the test stated above, we will consider adjusting the audit on this issue.
Taxpayer also contests the imposition of sales and use tax on its sales of books to public school groups and associations. Taxpayer contends that such sales should be exempt as sales for resale, sales to the Commonwealth or as sales to nonprofit public schools.
However, Section 58.1-602(14) of the Code states that in order to qualify as sales for resale, such sales must be made "in strict compliance with the rules and regulations applicable to this chapter." Furthermore, Section 63O-10-20 of the regulations states that, "the burden of proving that the tax does not apply rests with the dealer unless he takes, in good faith from the purchaser or lessee, a certificate of exemption indicating that the property is exempt under the law." It is the department's understanding that Taxpayer had no exemption certificates on file for the sale of any of the books. Therefore, such sales cannot be considered exempt as sales for resale.
Section 58.1-608(18) exempts from the sales and use tax, sales of Tangible personal property for use or consumption by the Commonwealth, any political subdivision of the Commonwealth, or the United States." In addition, §63O-10-96 of the Regulations states that "The tax does not apply to purchases by public free schools for their use or consumption, provided purchases are made pursuant to official purchase orders to be paid for out of public funds. The tax applies to purchases not paid out of public funds." (emphasis added) In conclusion, the regulation states, "Parent Teacher Associations or other groups engaging in fund raising projects are the consumers of any tangible personal property they purchase for their projects...[and] [t]he tax must be paid by them to their suppliers."
The purchase of books in the present case by school groups and associations for fund raising book fairs, are generally not made pursuant to official purchase orders or paid for out of public funds. Therefore, I must conclude that such sales are not exempt from the tax as sales to the Commonwealth. Nor would such purchases qualify as exempt purchases made by nonprofit or public schools.
Therefore, based on all of the above, I find no basis for correction of the assessment in this case, the full amount of which is hereby due and payable.
Sincerely,
W. H. Forst
Tax Commissioner
Re §58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply to your letter of March 27, 1985 on behalf of ***** (Taxpayer) for correction of an assessment in the above referenced case.
FACTS
Taxpayer is in the business of selling newspapers and magazines at retail. In connection with such sales of magazines and newspapers, Taxpayer operates a banding machine and uses other packaging materials to facilitate the allocation and delivery of such publications to various retail establishments. Taxpayer is also involved in the sale of books to public school groups and associations for book fair sales. Taxpayer claims that its banding machine and packaging materials qualify for the exemption from sales and use tax under §58.1-6O8(1)(c) or (d) of the Virginia Code, and that its sales of books to public schools should be exempt as either sales for resale, or sales to nonprofit public schools.
It is the department's understanding that Taxpayer is not directly involved in the publishing or printing of any of the publications it packages and sells. It is our further understanding that none of taxpayer's sales of books to public school groups were made pursuant to a resale exemption certificate.
DETERMINATION
§58.1-6O2(9) of the Virginia Code, defines manufacturing, processing, refining or conversion to include "the production line of [a] plant starting with the handling and storage of raw materials at the plant site and continuing through the last step of production where the product is finished or completed for sale and conveyed to a warehouse at the production site." Furthermore, this code section defines "manufacturing" to include those necessary ancillary activities of newspaper and magazine printing, "when such activities are performed by the publisher of any newspaper or magazine for sale daily or regularly at average intervals not exceeding three months."
Since taxpayer in the present case is not the publisher of the publications which it packages and delivers to its customers, the exemption in §58.1-6O2(9) is not available to exempt its packaging machinery and materials.
Section 58.1-608.1.d of the Code exempts from the sales and use tax, "materials, containers, labels, sacks, cans, boxes, drums or bags for future use for packaging tangible personal property for shipment or sale." Furthermore, §63O-10-26 of the Virginia Sales and Use Tax Regulations states in pertinent part, that "Packaging materials, such as containers, labels, etc....may be purchased tax exempt by wholesalers and retailers as purchases for resale, if the items are marketed with the product being sold and become the property of the purchaser."
Therefore, to the extent that the packaging materials described in the present case are marketed with the publications being sold, and become the property of taxpayers customers, they will be exempt from the sales and use tax. If taxpayer can provide the Technical Services Section of the Department with documentation, (within 30 days of this letter) detailing the extent to which such packaging materials meet the test stated above, we will consider adjusting the audit on this issue.
Taxpayer also contests the imposition of sales and use tax on its sales of books to public school groups and associations. Taxpayer contends that such sales should be exempt as sales for resale, sales to the Commonwealth or as sales to nonprofit public schools.
However, Section 58.1-602(14) of the Code states that in order to qualify as sales for resale, such sales must be made "in strict compliance with the rules and regulations applicable to this chapter." Furthermore, Section 63O-10-20 of the regulations states that, "the burden of proving that the tax does not apply rests with the dealer unless he takes, in good faith from the purchaser or lessee, a certificate of exemption indicating that the property is exempt under the law." It is the department's understanding that Taxpayer had no exemption certificates on file for the sale of any of the books. Therefore, such sales cannot be considered exempt as sales for resale.
Section 58.1-608(18) exempts from the sales and use tax, sales of Tangible personal property for use or consumption by the Commonwealth, any political subdivision of the Commonwealth, or the United States." In addition, §63O-10-96 of the Regulations states that "The tax does not apply to purchases by public free schools for their use or consumption, provided purchases are made pursuant to official purchase orders to be paid for out of public funds. The tax applies to purchases not paid out of public funds." (emphasis added) In conclusion, the regulation states, "Parent Teacher Associations or other groups engaging in fund raising projects are the consumers of any tangible personal property they purchase for their projects...[and] [t]he tax must be paid by them to their suppliers."
The purchase of books in the present case by school groups and associations for fund raising book fairs, are generally not made pursuant to official purchase orders or paid for out of public funds. Therefore, I must conclude that such sales are not exempt from the tax as sales to the Commonwealth. Nor would such purchases qualify as exempt purchases made by nonprofit or public schools.
Therefore, based on all of the above, I find no basis for correction of the assessment in this case, the full amount of which is hereby due and payable.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner