Tax Type
Retail Sales and Use Tax
Description
Advertising business; TV commercial; Video tape duplicates
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
08-26-1988
August 26, 1988
Re: Ruling Request/ Sales and Use Tax
Dear*****************
This will reply to your letter of July 11, 1988 seeking a ruling on the application of the sales and use tax to purchases by ************** (taxpayer) of audio/ video tapes (A/V's).
FACTS
You ask how the tax would apply to the purchase by the taxpayer, an advertising agency, of an A/V from an unrelated third party video production studio, where the A/V is produced under the taxpayer's direction and supervision. When completed, the taxpayer usually receives the master A/V which it retains for potential future use by its client, as well as several dubs for direct provision to the media for broadcast. You also ask whether the application of the tax would differ under these circumstances if the taxpayer only received dubs of the A/V while the video production studio retained the master.
Furthermore, you ask whether the tax would apply to the taxpayer's purchase of additional dubs of an A/V pulled from its file of previously produced A/V's for media broadcast. In addition, you ask whether the response to this question would differ if the additional dubs purchased were made from an A/V not originally produced under the taxpayer's direction and supervision.
RULING
By the enclosed ruling letter dated June 20, 1988, the department determined that in accordance with Virginia Regulation 630-10-3, (copy also enclosed), the purchase by an advertising agency of a finished video produced by a film studio, for use as a television commercial qualified for exemption from the tax as the purchase of media advertising. However, the enclosed ruling also determined that the tax applied to duplicate copies of a video purchased by the advertising agency in a separate transaction from an unrelated video duplication business.
Consistent with the enclosed ruling, and provided that the A/V is produced in connection with some media advertising campaign of its client, the tax will not apply to the purchase by the taxpayer from a third party video production studio and talents of a master A/V produced under the taxpayer's direction and supervision. In addition, the tax will not apply to any dubs of the A/V which might be purchased by the taxpayer from the video Production studio simultaneously with the master A/V.
Similarly, the tax would not apply to purchases by the taxpayer of such an A/V when the taxpayer only receives dubs of the A/V, while the video studio itself retains the master.
However, in accord with the enclosed ruling, when the taxpayer pulls from its file a master or dub of a previously produced A/V for use in having additional dubs made for media broadcast, the tax will apply to the total charge for such additional dubs. Moreover, the tax would apply to the total charge for such additional dubs, whether or not the master A/V was initially produced under the taxpayer's direction and supervision.
I hope that the foregoing has responded to your questions, but let the department know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner