Tax Type
Retail Sales and Use Tax
Description
Photography studio
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
03-17-1986
March 17, 1986
Re: Request for Ruling/Sales and Use Tax
Dear *****************
This will reply to your letters of December 4, 1985, in which you request the reconsideration of my ruling of August 24, 1984 to ************* and request a ruling on the application of the sales and use tax to the reorganization of a photography business.
*************** (Taxpayer) is engaged in the operation of a photography studio. The taxpayer's operations were deemed ineligible for the statutory industrial manufacturing and processing exemption in my ruling of August 24, 1984 as the processing performed under the circumstances was ancillary to the service provided by the taxpayer. The finding that the taxpayer was not entitled to the exemption was supported and continues to be supported by the Virginia Supreme Court's opinions in Golden Skillet Corporation v. Commonwealth, 214 Va. 276, 199 S.E. 2d 511 (1973) and Commonwealth v. Orange-Madison Coop, 220 Va. 655, 261 S.E. 2d 532 (1980) and a 1974 opinion of the Attorney General. Furthermore, it is noted under the Virginia Code Section 58.1-602.9 definition of manufacturing and processing that those businesses qualifying for exemption include those "classified in Codes 10 through 14 and 20 through 39 published in the Standard Industrial Classification Manual." The taxpayer's operations were found to be located in codes 72 and 73 of that publication.
You request reconsideration of my earlier ruling in light of a letter from a departmental representative in which a film processing operation was deemed to qualify for the Virginia Code Section 58.1-608.1 industrial manufacturing and processing exemption. The subject of that letter was a business engaged in film processing and the production of prints for itself and several other businesses. The business in question presumably was not engaged in taking photographs as is the instant taxpayer.
Photoprocessing laboratories of the type considered exempt in the above referenced letter qualify for exemption as the processing performed is not secondary to the sale of photographs. As noted above, the processing performed by the taxpayer in this case was secondary to its sale of photographs made in its studios. However, if the taxpayer were to organize its photography studios and its photoprocessing operation separate from each other, the photoprocessing operation would be entitled to the industrial exemption. Under such a separate organization, the processing performed in the photoprocessing operation would not be secondary to the sale of photographs by the taxpayer's studios. However, studio equipment and other tangible personal property used in the taxpayers studios would remain subject to tax as the manufacturing or processing performed at such locations would continue to be secondary to the sale of photographs.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner