Tax Type
Retail Sales and Use Tax
Description
Photocopy machines used by printers
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
12-19-1985
- December 19, 1985
Re: Request for Ruling/Sales and Use Tax
Dear ****
This will reply to your letter of September 17, 1985, in which you request a ruling on the applicability of the sales and use tax to photocopy machines used by printers.
Section 58.1-602.1 of the Code of Virginia provides an exemption from the sales and use tax for "machinery or tools or repair parts therefor or replacements thereof...used directly in...processing, (or) manufacturing...products for sale or resale." The Virginia Supreme Court, in Golden Skillet Corporation v. Commonwealth, 214 Va. 276, 199 S.E.2d 511 (1973), held that the above statute was intended "to provide exemption for machinery and tools used in...manufacturing...products for sale or resale only in the industrial sense, 214 Va. at 278. Therefore, in order for machinery or tools to gain exemption under Virginia Code Section 58.1-608.1, two tests must be satisfied. First, the machinery or tools must be an integral part of a process in which products are manufactured for sale or resale and second, the manufacturing process must be industrial in nature
The department has traditionally considered the operation of printing presses by a printer to be an industrial operation. Similarly, photocopy machines used by a printer in place of conventional printing presses, as opposed to those used simply to reproduce documents for the purpose of selling copies to customers, have been considered to be used in an industrial manner.
Photocopy machines which are used by a printer merely to reproduce copies of originals for sale to customers are not considered to be used in an industrial manner, just as "quick copy centers" and photocopy machines operated by libraries, drug stores, etc., are not considered industrial, because the processing performed by such machines is purely incidental to the subsequent sale of copies at retail. This policy is supported by the Virginia Supreme Court's opinions in Golden Skillet, supra and Commonwealth v. Orange-Madison Coop, 220 Va. 655, 261 S.E.2d 532 (1980).
Based upon the foregoing, photocopy machines used by a printer are exempt from the tax only to the extent used in place of printing presses. When a single machine is used both in a taxable and exempt manner, the application of the tax must be determined by using the preponderance of use tax explained in Section 63O-10-63 of the Virginia Retail Sales and Use Tax Regulations, subsection D.
Whether or not an industrial usage is involved, exemption from the tax is available to the operators of photocopying equipment on their purchases of paper, staples, and other items that become component or ingredient parts of printing sold to customers. Such items may be purchased exclusive of the tax when vendors are furnished resale exemption certificates.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner