88-219 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Magazine advertising the sale of homes; Printed in Maryland

Topic

Taxability of Persons and Transactions

Date Issued

07-29-1988

July 29, 1988

Re: Request for Ruling/Retail Sales and Use Tax

Dear***************

This will reply to your letter dated June 17, 1988, in which you requested a ruling as to whether the Virginia Retail Sales and Use Tax applies to your client's ("The Taxpayer") business of publishing a magazine.

FACTS

The Taxpayer owns a publishing business which publishes a bi-weekly magazine advertising for sale homes located in Northern Virginia. Pictures, prices and other pertinent data are included in the publication. The Taxpayer lives in Maryland, his office is located in Maryland, and the magazine is produced and printed in Maryland. The Taxpayer solicits most of his business by telephone from his home, although occasional sales are made as a result of personal meetings in Virginia.

Once an advertisement is confirmed, the Taxpayer picks up pictures of the homes in Northern Virginia and takes them to a printer in Maryland for composition, production, layout, etc o

After the magazine is printed in Maryland, it is shipped by the printer to a warehouse rented by the Taxpayer in Fairfax County, Virginia. Within two to three hours thereafter, independent contractors pick up and deliver the magazine throughout Northern Virginia to drugstores, supermarkets, banks and the like, but not to newsstands. The public may take the magazine from these Places at no charge.

RULING

Va. Code §58.1-604, imposes a use tax "upon the use or consumption of tangible personal property in this Commonwealth...." "Use" is defined as the "exercise of any right or power over tangible personal property incident to ownership thereof, except that it does not include the sale at retail of that property in the regular course of business. Va. Code §58.1-602(20). Furthermore, use tax includes "storage" which "means any keeping or retention of tangible personal property for use, consumption or distribution in this Commonwealth, or for any purpose other than sale at retail in the regular course of business. Va. Code §§58.1-602(18) and 58.1-608(21).

The Taxpayer contends that the magazine is exempt from use tax under the publication exemption, Virginia Code §58.1-608(13), which states that:

- Any publication issued daily, or regularly at average intervals not exceeding three months, and advertising supplements and any other printed matter ultimately distributed with or as part of such publications [are not subject to the tax], except that newsstand sales of the same are taxable.

The Taxpayer also contends that the magazine is exempt from the tax under the advertising exemption set forth in Va. Code §58.1-608(57). This code section is interpreted by Virginia Retail Sales and Use Tax Regulations §630-10-3, which states:

- The tax does not apply to charges by an advertising business for professional services in the planning, creating or placing of advertising in newspapers, magazines....
  
  Advertising businesses are engaged in providing professional services and are the users and consumers of all tangible property purchased for use in such business. Therefore, the tax applies to all purchases by an advertising business including....printing...[and] brochures....

Neither of these exemptions is applicable in this case. The Taxpayer contracted with a Maryland printer who delivered the property to the Taxpayer in Virginia. Therefore, the transfer of title and possession of the printing occurred upon delivery to the purchaser in Virginia.

Even assuming, for the sake of discussion, that the Taxpayer was entitled to either the advertising or publication exemption, neither would act to exempt the purchase of the printing. Va. Code §58.1-602(23), which defines "advertising" for purposes of the exemption set forth in Va. Code §58.1-608(57), specifically provides that:

- 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 is clearly applicable to the purchase of printing. See also Virginia Retail Sales and Use Tax Regulations §630-10-3, §3(B)(1).

There would likewise be no exemption for the charge for printing a publication to be distributed free of charge. The sale of custom printing is clearly a taxable transaction. If the material, whether publication or otherwise, were for ultimate sale, a resale exemption would be applicable. However, in this case there is no ultimate sale.

Thus, in this case the Taxpayer used and consumed the property within the Commonwealth and is subject to use tax under Va. Code §58.1-604.

If sales tax is paid on the purchases of tangible personal property in another state, the Department will grant a "credit against the use tax imposed by Virginia on its uses within this state for the amount of tax paid in the state of purchase." Virginia Retail Sales and Use Tax Regulations §630-10-29.

If you have any further questions, please contact the Department.

Sincerely,

W. H. Forst
Tax Commissioner

Rulings of the Tax Commissioner