Tax Type
Retail Sales and Use Tax
Description
Financial data provider; Magnetic tape transfer
Topic
Taxability of Persons and Transactions
Date Issued
11-03-1986
November 3, 1986
Re: §58.1-1821 Application/Sales and Use Tax
Dear ****************
This will reply to your letter of June 11, 1986, in which you submit an application for correction of sales and use tax assessed to ***************** as the result of a recent audit.
FACTS
*************** (Taxpayer) is engaged in the collection and dissemination of financial data on various publicly-held corporations. The data obtained by the taxpayer is entered into a computer data base from which selective information is later drawn for customers. Customers will specify to the taxpayer the specific data that should be provided, the format in which the data is to be received, and the medium of transfer (magnetic tape, hard copy, etc.). The taxpayer contests the imposition of tax in this case upon customized data furnished to customers on magnetic tape, as well as data on the performance of certain public utility stocks provided to a financial magazine in camera ready format.
DETERMINATION
§58.1-608.2 of the Code of Virginia provides an exemption from the sales and use tax for "[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made."
As noted in Virginia Regulation 630-10-97.1, "[i]n order to determine whether a particular transaction which involves both the rendering of a service and the provision of tangible
personal property constitutes an exempt service or a taxable retail sale, the "true object" of the transaction must be examined." The regulation goes on to state:
-
- If the object of the transaction is to secure a service and the tangible personal property which is transferred is not critical to the transaction, then the transaction may constitute an exempt service. However, if the object of the transaction is to secure the property which it produces, then the entire charge, including services provided, will be taxable.
An examination of the contested transactions reveals that each is exempt from the sales and use tax as the tangible personal property provided to the customer in each event was inconsequential to the overall transaction. In each event, the customer sought from the taxpayer financial data tailored to the customer's specific needs. Thus, the true object of each transaction was to obtain the services of the taxpayer in selecting and collating financial information, rather than the tangible personal property (magnetic tapes or camera ready copy) used to transmit the data.
Based upon the foregoing, the assessment issued to the taxpayer will be revised to delete the contested transactions involving the sale of financial data in customized form.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner