Tax Type
Retail Sales and Use Tax
Description
Sales by recording studio
Topic
Taxability of Persons and Transactions
Date Issued
08-26-1986
August 26, 1986
Re: §58.1-1821 Application/Sales and Use Tax
Dear ******************
This will reply to your letter of June 11, 1986, in which you request relief of sales and use tax assessed to your business as the result of a recent audit.
You note in your letter that you were engaged in the operation of a recording studio. A recent audit of the business produced an assessment for the failure to collect the sales tax from customers on their purchase of recordings. You contest the assessment, stating that the transactions are exempt from the tax under the "true object" test described in Virginia Regulation 630-10-97.1.
The question of whether recording services are exempt under the true object concept was specifically addressed and found taxable by the Virginia Supreme Court in WTAR Radio-TV v. Commonwealth, 217 Va. 877, 234 S.E.2d 245 (1977), which dealt with the production and recording of television commercials. The question has also been addressed by the department in a previous determination (see enclosed letter dated October 25, 1984).
Based upon the above referenced court opinion and the enclosed letter, the department's auditors were correct in assessing the tax in this case. However, because there has apparently been considerable confusion in the industry as the result of conflicting information, the department's audit will be revised to remove that portion of the assessment relating to nontaxed sales.
The revisions noted above will be made as soon as practicable. Although I understand that your business is no longer in operation, please do not hesitate to contact the department if any further questions arise as to the application of the tax to recording studio charges.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner