Tax Type
Retail Sales and Use Tax
Description
One-Hour Photo Processing Labs
Topic
Taxability of Persons and Transactions
Date Issued
04-22-1986
April 22, 1986
Re: Request for Ruling/Sales and Use Tax
Dear ***************
This will reply to your letter of January 6, 1985, in which you request a ruling on the applicability of the sales and use tax to a one hour photo processing business.
FACTS
The taxpayer is engaged in the operation of one hour photo processing laboratories. While this business, ************* is part of a corporation that operates a photography studio,********** the two businesses are organized separately. The taxpayer in this case is engaged exclusively in the processing of prints from customers' film and also sells film. The taxpayer does not operate a studio in which photographs are taken and sold.
RULING
Section 58.1-608.1 of the Code of Virginia provides an exemption from the sales and use tax for "machinery or tools or repair parts therefor or replacements thereof, fuel, power, energy, or supplies, used directly in processing...of products for sale or resale." In addition, the statute exempts the raw materials used in such processing as well as any materials that become an ingredient or component part of the finished products resulting from such processing.
In interpreting the above exemptions, the Virginia Supreme Court concluded in Commonwealth v. Orange-Madison Coop, 220 Va. 655, 261 S.E. 2d 532 (1980), that "[n]ot all processing...qualifies for the exemption." Rather, the court stated that the exemption was limited only to processing "in the industrial sense".
The department has traditionally deemed photo processing that is performed as an incidental part of the operation of a photography studio or camera shop to be nonindustrial in nature based upon the opinions of the Virginia Supreme Court in Golden Skillet v. Commonwealth, 214 Va. 276, 199 S.E.2d 511 (1973) and Orange-Madison, supra. In this case, however, the taxpayer processes film furnished by customers and does not operate a photography studio. Nor is the photo processing performed by the taxpayer secondary in nature to the operation of a camera shop. Therefore, based upon the information provided by the taxpayer, the photo processing operation at issue here qualifies for the industrial processing exemption set forth above.
This ruling applies only to the specific factual situation described by the taxpayer and will have no effect should the operations of the taxpayer change or if the taxpayer's operations differ from the facts presented.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner