Tax Type
Retail Sales and Use Tax
Description
Bulk purchase of order forms by mail order businesss
Topic
Property Subject to Tax
Date Issued
07-14-1986
July 14, 1986
Re: §58.1-1821 Application/ Sales and Use Tax
Dear *********************
This will reply to your letter of April 24, 1985 seeking correction of an assessment issued in the above referenced case for the period June 1, 1981 through September 30, 1984.
FACTS
In connection with its mail order fashion supply business, ************** (taxpayer), was held subject to Virginia's retail sales and use tax on its purchase of certain Order Notification Forms enclosed with each shipment of merchandise sent to customers, both in and out of state. According to taxpayer the form is used to convey information regarding the customer's merchandise order, namely: its size, color, price, any items back ordered or substitutions, etc. It is the department's understanding however, that such form is also used by taxpayer to prepare the orders for shipment and that a portion of the form is used as an address label.
Taxpayer contends that its order form should be considered exempt from sales and use taxation as a "packing list" and not a taxable "invoice" under §630-10-53, (formerly §1-53), of the Virginia Retail Sales and Use Tax Regulations, since all of its orders are prepaid by check or major credit card.
DETERMINATION
§630-10-53 of the regulations provides, that "[t]he tax does not apply to purchases of labels, tags or nameplates when used solely for packaging tangible personal property for sale. These purchases become part of the product for sale or resale." For example, this section continues, the tax does not apply to purchases of such items, "when they provide information about the nature, quality, maker, price, size, operation, maintenance or destination of the tangible personal property packaged for sale." Furthermore, "the tax does apply to purchases of inserts and invoices, etc." (Emphasis added)
Black's Law Dictionary, (5th edition, 1979), defines "invoice" to mean, "[a] document, showing details of a sale or purchase transaction..[or]... [a] list sent to a purchaser... containing the items, together with the prices and charges of merchandise sent or to be sent to him."
Based on the foregoing, whether the forms in the present case are characterized as invoices or packing lists, they do not qualify for the exemption cited above since they are not used solely for packaging tangible personal property for sale. Rather such forms are primarily used in an administrative function by taxpayer to insure that its customers orders are filled correctly and to communicate relevant billing information to its customers.
This conclusion is supported by §630-10-63(C)(l) of the regulations which provides in pertinent part that, "[t]angible personal property used in administration is subject to the tax, [and includes],.. property used for customer billing, purchasing records, etc.."
In addition, the order forms in the present case were properly held subject to the tax, notwithstanding the subsequent shipment of the bulk of such forms out of state, since upon taking possession and control of the forms in Virginia, taxpayer made a taxable "use" of them within the meaning of the sales and use tax law. §58.1-602(20) of the Virginia Code defines "use" to mean, "the exercise of any right or power over tangible personal property incident to the ownership thereof, except that it does not include the sale at retail of that property in the regular course of business." Therefore, as soon as taxpayer took delivery of the order forms in Virginia for use in processing its customers orders, it became subject to the tax, regardless of the origination point of the order, or the location of the intended recipient of the order.
Based on all of the foregoing, I find no basis for correction of the assessment in this case. However, I will consider the abatement of one-half of all penalties assessed in this case upon receipt of the remaining half, together with all tax and interest due, within thirty days (30) of the date of this letter. Such payment should be sent to the Technical Services Section, Office Services Division of the Department at P.O. Box 6-L, Richmond, Virginia 23282.
Sincerely,
W.H. Forst
Tax Commissioner
Rulings of the Tax Commissioner