Tax Type
Retail Sales and Use Tax
Description
Advertising exemption; Magazine publication
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
12-29-1986
December 29, 1986
Re: Ruling Request/ Sales and Use Tax
Dear ********************
This will reply to your letter of September 18, 1986 seeking a ruling on the correct application of the sales and use tax to transactions of ************** (taxpayer), in the publication of a quarterly magazine.
FACTS
Ancillary to its primary function as publisher of a quarterly magazine, taxpayer provides services in the planning and creation of advertisements, for parties seeking to advertise in its magazine. Accordingly, taxpayer requests a ruling whether its costs incurred in the printing of such advertisements in its publication qualify for exemption from the tax under §58.1-608(57) of the Virginia Code.
RULING
Effective July 1, 1986, §58.1-608(57) of the Virginia Code provides an exemption from the sales and use tax for "advertising" which is defined in §58.1-602(23) of the Code as, "the planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting and other media, including, without limitation, the providing of concept, writing, graphic design, mechanical art, photography and production supervision." However, this section continues, "[a]ny person providing advertising as defined herein shall be deemed to be the user or consumer of all tangible personal property purchased for use in such advertising."
Therefore, as of July 1, 1986 advertising businesses are the users and consumers of all tangible personal property, including printing, purchased for use in the creation of advertising, and they may not purchase such items exempt of the tax for resale to their clients.
However, taxpayer in the present case is primarily a publisher of a magazine for sale at retail and the advertising services it provides to some of its advertisers are ancillary to its main function as a publisher. Accordingly, the correct application of the tax in this case is not determined by reference to the advertising exemption, but rather by reference to §§58.1-603(1) and 58.1-602(14) of the Code.
§58.1-603(1) or the Code imposes the sales tax on the sales price of each item or article of tangible personal property sold at retail in Virginia. §58.1-602(14) of the Code then defines "sold at retail" to mean, "a sale to any person for any purpose other than for resale in the form of tangible personal property..."(Emphasis added)
Therefore, inasmuch as taxpayer's purchases of printing, both editorial printing and advertising printing, are for retail sale in its publication, such purchases will not be subject to the tax provided it gives its printer a properly completed resale certificate of exemption (Form ST-10, copy enclosed), indicating that such purchases are for resale.
However, it should be noted that if taxpayer ever goes beyond the provision of advertising services for parties seeking to advertise in its publication, its purchases of printing or any other tangible personal property pursuant to the provision of such services will be subject to the tax in accord with the requirements of §58.1-602 (23) of the Code, cited above. For example, if on behalf of a client, taxpayer creates an advertisement for placement in one of its client's brochures, its purchase of such brochures from an outside printer will be subject to the tax.
I hope all of the above is of assistance to you, but please let me know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner