Tax Type
Retail Sales and Use Tax
Description
News information provider
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
01-04-1989
January 4, 1989
Re: Request for Ruling: Sales and Use Tax
Dear******************
This will reply to your letter of November 16, 1988 regarding the applicability of the sales and use tax to services provided by **************("The Taxpayer") to subscribers in Virginia.
FACTS
The Taxpayer is in the business of providing market data and news information to subscribing customers in Virginia and elsewhere. The Taxpayer provides the following types of services to its subscribers: 1) a basic charge per quarter which includes the lease of a video monitor, keyboard, controller and computer terminal for constant on-line computer access to the Taxpayer's information network of market data and news items; 2) a communication charge per quarter for the telephone network hookup; 3) the lease of optional equipment; 4) optional services for access to additional information outside of the basic range of information normally available to subscribers; and 5) a display fee for access to information via equipment owned by the subscriber. A subscriber must contract for the basic system described in item 1, before items 2 through 5 can be used.
RULING
§58.1-608(2) of the Code of Virginia provides an exemption from the sales and use tax for "[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made." In interpreting this exemption, the Virginia Supreme Court has adopted the "true object" test:
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- if the "true object" sought by the buyer is the services per se, the exemption is available, but if the true object of the buyer is to obtain the property produced by the service, the exemption is not available. WTAR Radio-TV v. Commonwealth. 217 Va. 877, 234 S.E.2d '45 ( 1 977).
Based on the information presented, the charges made by the Taxpayer constitute charges for a transaction, the true object of which is the service of providing market data and news information to subscribing customers. Therefore, the charges are exempt from the Virginia Sales and Use Tax. However, as the provider of this service, the Taxpayer is required to remit use tax on any equipment provided to subscribers or any other tangible personal property used in Virginia to provide the service.
Enclosed for your perusal is a copy of a recent ruling which further outlines the application of the tax to transactions involving the provision of stock; market quotation and financial news information.
I trust this information answers your questions. However, please contact the department if you need additional information.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner