Tax Type
Retail Sales and Use Tax
Description
Advertising business; Purchases for resale
Topic
Exemptions
Date Issued
02-26-1987
February 26, 1987
Re: Ruling Request/ Sales and Use Tax
Dear ************************
This will reply to your letter of October 2. 1986 seeking information on the correct application of the sales and use tax to transactions between ****************(Taxpayer) and its clients.
FACTS
Specifically, you ask whether the taxpayer's purchase of printing from an outside printer in the form of in-house directories, for resale to a nonprofit hospital client, qualifies for exemption from the tax as a purchase of tangible personal property for resale, since such in-house directories do not represent media advertising.
RULING
Effective July 1, 1986 the tax does not apply to "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 or other media, including without limitation, the providing of concept, writing, graphic design, mechanical art, photography and production supervision."
As a result of this law change, the Department has recently revised §630-10-3 of the Retail Sales and Use Tax Regulations, a copy of which is enclosed.
Subsection 2(B)(2) of the regulation provides that the tax applies to "printing", purchased by an advertising business in the production of media advertising. However, since in-house directories do not qualify as "media" advertising as defined in subsection 1 of the regulation, an advertising business may purchase such items exempt of the tax pursuant to resale certificate of exemption ST-10.
In addition, while such an advertising business would generally be required to collect and report the tax on the total charge to its client for the production of such in-house directories, including charges for printing, it will not be required to do so if it takes a valid certificate of exemption from such client indicating that the client is specifically exempt of sales and use taxation under Virginia law.
Therefore, I find basis for concluding that purchases by an advertising business of in-house directories for resale qualify for exemption from the tax provided such purchases are made pursuant to valid resale certificates of exemption.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner