Tax Type
Retail Sales and Use Tax
Description
Computer used in research and printing
Topic
Taxability of Persons and Transactions
Date Issued
10-30-1989
October 30, 1989
Re: Request for Ruling: Sales and Use Tax
Dear****************
This will reply to your letter dated September 7, 1989, in which you requested a ruling for exemption from sales and use tax for specific purchases of computer equipment used in the organization's research function and for the production and printing costs of certain publications.
FACTS
********* ("The Taxpayer"), is a nonprofit organization exempt from income taxation under §501(c)(3) of the Internal Revenue Code. The Taxpayer provides statistical data to legislatures, police departments, insurance companies, etc., with the goal of reducing motor vehicle crash losses (i.e. deaths, injuries, and property damage), as well as statistical information of the relative loss characteristics of specific vehicles for both personal injury losses and property losses caused by damage and theft. The Taxpayer's research programs involve extensive use of computers to process and store insurance data on claims. The Taxpayer distributes printed educational publications free of charge to the public upon request.RULING
Application of the Research and Development Exemption
Va. Code §58.1-608(19) provides an exemption for "tangible personal property purchased for use or consumption directly and exclusively in basic research or research and development in the experimental or laboratory sense." (emphasis added). Subsection © of Virginia Regulation 630-10-92 includes the following activities within the scope of the exemption:
-
- 1. The development of new products;
2. the improvement of existing products;
3. the development of new uses for existing products.
- 1. The development of new products;
Subsection (D) of the regulation defines the term "used directly" to mean, "those activities which are an integral part of ... research and development activities, including all steps of such processes, but not including secondary activities such as administration, general maintenance, product marketing and other activities collateral to the actual research process." The term "used exclusively" refers to, "items used solely in exempt research activities. Items used both in exempt and nonexempt activities are ... subject to tax." (Emphasis added).
The regulation also states that basic research and research and development do not include environmental analysis, testing of samples for chemical content, operations research, feasibility studies, consumer surveys, economic surveys, or research in social sciences.
The accumulation and reporting of statistical data does not constitute basic research or research and development. Therefore, computer equipment purchased for use in those activities will be taxable inasmuch as it is not used exclusively in research activities.
Application of the Printing Exemption
Va. Code §58.1-608(6)(d) allows a sales tax exemption for catalogs, letters, brochures, reports, and similar printed materials, except administrative supplies when stored for twelve months or less in the Commonwealth and distributed for use without the Commonwealth. Taxable administrative supplies shall include letterhead, envelopes (other than those used to mail exempt printed materials), stationery, invoices, billing forms, payroll forms, price lists, time cards, computer cards, and similar supplies.
Based on the information presented, the exemption would apply to the taxpayer's free publications, to the extent that they are distributed outside of Virginia after storage here for twelve months or less.
This ruling is based upon the facts presented in the taxpayer's September 7, 1989 letter. Any change in the factual situation presented may affect the application of the tax to the taxpayer.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner