Tax Type
Retail Sales and Use Tax
Description
Publications;Advertising Supplements
Topic
Exemptions
Date Issued
04-15-1985
April 15, 1985
Dear ****
This will reply to your letter of February 14, 1985 in which you submit an application for correction of sales and use tax assessed to * * * as the result of a recent audit.
FACTS
A recent audit of * * * ("Taxpayer') produced an assessment for the failure to remit the sales and use tax on advertising supplements distributed by Virginia newspapers for the taxpayer during the period from October 1, 1981 through August 31, 1984. The taxpayer contests such assessment, asserting that it did not exercise power or control such advertising supplements in Virginia sufficient for the tax to be imposed. In addition, the taxpayer asserts that the advertising supplements in question became integral, component parts of the newspapers with which they were distributed and were therefore exempt from the tax under the provisions of Virginia Code Section 58.441.6(k). Lastly, the taxpayer asserts that the advertising supplements were sold to the newspapers that distributed them and held for resale and that the assessment is violative of the Commerce and Due Process clauses of the U.S. Constitution as it abridges the freedom of the press and speech.
DETERMINATION
Section 58.1-604 of the Code of Virginia imposes a tax "upon the use or consumption of tangible personal property in this State, or the storage of such property outside the State for use or consumption in this State.' Virginia Code Section 58.1-602.20 in turn defines "use' as "the exercise of any right or power over tangiblepersonal property incident to the ownership thereof.'
It is noted that the supplements in question were printed outside of Virginia by printers under contract to the taxpayer and shipped by those printers to Virginia newspapers for distribution. The taxpayer asserts that under such procedure it exercised no right or power incident to ownership over the supplements in Virginia; however, the fact that the taxpayer did not take actual physical possession of the supplements in Virginia is not material. With respect to an argument similar to that of the taxpayer, the Virginia Supreme Court held in WTAR Radio-TV Corporation v. Commonwealth, 217 Va. 877, 234 S.E. 2d 245 (1977) that "the showing of films over television was tantamount to a delivery of tangible personal property to the buyer of the advertisement for which he paid a consideration' despite the fact that the customer never took possession of the films. As the facts involved in WTAR are analogous to the facts here, I must conclude that the taxpayer took constructive delivery of the supplements in Virginia and therefore exercised a use over the supplements sufficient for the tax to be imposed.
Furthermore, I must deny relief to the taxpayer despite its assertion that the supplements in question were exempt from the tax under the provisions of Virginia Code Section 58-441.6(k) (now Virginia Code Section 58.1-608.13). That statute exempted "[a]ny publication issued daily, or regularly at average intervals not exceeding three months.' In interpreting the publication exemption, it is important to note that the legal incidence of the Virginia sales and use tax is on the purchaser. United States v. Forst, 442 F. Supp. 920 (W.D. Va. 1977), affirmed, 569 F. 2d 811 (4th Cir. 1978). Therefore, the legal incidence of tax exemptions is on the purchaser. Finding no evidence that the newspapers in question purchased the inserts, an exemption is not available here.
Lastly, I find no evidence that a sale for resale situation existed in this case or that the assessment issued by the department is violative of the Commerce or Due Process Clauses.
Based upon the foregoing, I find no basis for the relief of tax assessed upon newspaper advertising supplements. However, I find basis for the acceptance of an offer in compromise of this assessment inasmuch as litigation on this same issue was recently settled by the department and the litigant. Under a compromise, I would be willing to abate 38 percent of the tax and interest relating to newspaper advertising supplements assessed to the taxpayer. Please contact the department within thirty days if you wish to pursue such a compromise.
Dear ****
This will reply to your letter of February 14, 1985 in which you submit an application for correction of sales and use tax assessed to * * * as the result of a recent audit.
FACTS
A recent audit of * * * ("Taxpayer') produced an assessment for the failure to remit the sales and use tax on advertising supplements distributed by Virginia newspapers for the taxpayer during the period from October 1, 1981 through August 31, 1984. The taxpayer contests such assessment, asserting that it did not exercise power or control such advertising supplements in Virginia sufficient for the tax to be imposed. In addition, the taxpayer asserts that the advertising supplements in question became integral, component parts of the newspapers with which they were distributed and were therefore exempt from the tax under the provisions of Virginia Code Section 58.441.6(k). Lastly, the taxpayer asserts that the advertising supplements were sold to the newspapers that distributed them and held for resale and that the assessment is violative of the Commerce and Due Process clauses of the U.S. Constitution as it abridges the freedom of the press and speech.
DETERMINATION
Section 58.1-604 of the Code of Virginia imposes a tax "upon the use or consumption of tangible personal property in this State, or the storage of such property outside the State for use or consumption in this State.' Virginia Code Section 58.1-602.20 in turn defines "use' as "the exercise of any right or power over tangiblepersonal property incident to the ownership thereof.'
It is noted that the supplements in question were printed outside of Virginia by printers under contract to the taxpayer and shipped by those printers to Virginia newspapers for distribution. The taxpayer asserts that under such procedure it exercised no right or power incident to ownership over the supplements in Virginia; however, the fact that the taxpayer did not take actual physical possession of the supplements in Virginia is not material. With respect to an argument similar to that of the taxpayer, the Virginia Supreme Court held in WTAR Radio-TV Corporation v. Commonwealth, 217 Va. 877, 234 S.E. 2d 245 (1977) that "the showing of films over television was tantamount to a delivery of tangible personal property to the buyer of the advertisement for which he paid a consideration' despite the fact that the customer never took possession of the films. As the facts involved in WTAR are analogous to the facts here, I must conclude that the taxpayer took constructive delivery of the supplements in Virginia and therefore exercised a use over the supplements sufficient for the tax to be imposed.
Furthermore, I must deny relief to the taxpayer despite its assertion that the supplements in question were exempt from the tax under the provisions of Virginia Code Section 58-441.6(k) (now Virginia Code Section 58.1-608.13). That statute exempted "[a]ny publication issued daily, or regularly at average intervals not exceeding three months.' In interpreting the publication exemption, it is important to note that the legal incidence of the Virginia sales and use tax is on the purchaser. United States v. Forst, 442 F. Supp. 920 (W.D. Va. 1977), affirmed, 569 F. 2d 811 (4th Cir. 1978). Therefore, the legal incidence of tax exemptions is on the purchaser. Finding no evidence that the newspapers in question purchased the inserts, an exemption is not available here.
Lastly, I find no evidence that a sale for resale situation existed in this case or that the assessment issued by the department is violative of the Commerce or Due Process Clauses.
Based upon the foregoing, I find no basis for the relief of tax assessed upon newspaper advertising supplements. However, I find basis for the acceptance of an offer in compromise of this assessment inasmuch as litigation on this same issue was recently settled by the department and the litigant. Under a compromise, I would be willing to abate 38 percent of the tax and interest relating to newspaper advertising supplements assessed to the taxpayer. Please contact the department within thirty days if you wish to pursue such a compromise.
Rulings of the Tax Commissioner