Tax Type
Retail Sales and Use Tax
Description
Media advertising service
Topic
Taxability of Persons and Transactions
Date Issued
06-02-1987
June 2, 1987
Dear ***************
This will reply to your letter of March 26, 1987 seeking information on the correct application of the sales and use tax to transactions involving ************** (taxpayer) in connection with its provision of media advertising services.
FACTS
According to your letter and information provided to a member of my staff by telephone on May 7, 1987, the taxpayer is engaged primarily in the sale of writing, for use in newspaper layouts and radio scripts, to advertising businesses and others who then run the ads in the print or broadcast media of their own choosing. On an occasional basis the taxpayer actually purchases type, artwork, printing, etc., and delivers to its clients a finished brochure.
Accordingly, the taxpayer requests a ruling whether it must collect the tax in making charges to its clients for its provision of writing for use in media advertising. In addition, the taxpayer requests a ruling on whether it must pay the tax on its purchases of materials for use in providing writing for placement in media advertising. In addition, the taxpayer asks whether the tax applies to the total charge for providing one of its clients with a finished brochure, to be used by the client in advertising some product or service, when the charge includes charges for items such as printing, typesetting, artwork, etc., purchased by the taxpayer on behalf of the client, from an outside source.
RULING
Effective July 1, 1986, the retail sales and use tax does not apply to "advertising" which is defined in §58.1-602(23) of the Code of Virginia 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. Any 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, the tax does not apply to charges by an advertising business, such as the taxpayer, for the provision of writing or scripts for use in media advertising whether the taxpayer or some other advertising business or client actually places the advertising in the media. However, in accordance with the last sentence of §58.1-602(23) of the Code cited above, all purchases of materials such as ink, paper, layout boards, office supplies and similar supplies used and consumed by the taxpayer in connection with its provision of writing for use in advertising, are taxable and may not be purchased pursuant to resale certificate of exemption.
In addition, the tax does not apply to the total charge by the taxpayer to its client for the provision of the brochure described above notwithstanding that such charge may include charges for printing, typesetting, artwork, etc., provided by some outside source. In addition, purchases by the taxpayer of finished artwork for use in such brochure are nontaxable based on the code section previously cited. However, all purchases by the taxpayer of printing, typesetting or any other items of tangible personal property used in creating such brochures are taxable and, as with the materials and supplies mentioned above, may not be purchased by the taxpayer pursuant to resale certificate of exemption.
Furthermore, the taxpayer should not add the tax which must be paid on any of its purchases of printing, typesetting, or other items to its charges to clients for the provision of its services. Rather, the taxpayer should take such tax paid into consideration when setting its fees to clients for the provision of its services.
I hope all of the foregoing has responded to your questions, but let me know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner