Tax Type
Retail Sales and Use Tax
Description
Graphic design business
Topic
Taxability of Persons and Transactions
Date Issued
07-23-1990
July 23, 1990
Re: Ruling Request: Sales and Use Tax
Dear ****
This will reply to your letter of May 17, 1989 seeking a ruling on the application of the sales and use tax to ******** (the "taxpayer"). We regret the delay in providing you with this response.
FACTS
The taxpayer is a handlettering and design business which designs logos, letterhead, envelopes, business cards, brochures, advertising, fliers, poetry lettered in calligraphy, and lettering for certificates, awards, diplomas, resolutions and similar documents. The taxpayer also occasionally provides "sand-blasting" of lettering into glass for use on business door and window fronts.
In the past the taxpayer has charged sales tax on its total charge to customers whenever it created something where nothing existed before, but did not charge the tax when it merely filled in a name and date on a printed certificate provided by its client. In the past the taxpayer has also provided suppliers with Form ST-10's, (resale certificates of exemption), when making purchases of materials and supplies for use in its design work. Recently however, the taxpayer's main typesetting supplier has refused to honor the taxpayer's ST-10 and has insisted that it charge sales tax on all typesetting sold to the taxpayer. Therefore, you ask for clarification of the sales and use tax as applied to the various aspects of your handlettering and design business.
RULING
Please find enclosed a copy of a recent ruling of the department which sets forth the application of the tax to the calligraphy portion of your business.
Since July 1, 1986 the tax has not applied to "advertising" which is defined in §58.1-602 of the Virginia Code as, "the planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting and other media. including, without limitation, the providing of concept, writing, graphic design, mechanical art, photography and production supervision. 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." (Emphasis added)
Under this exemption, whenever the taxpayer provides graphic design for use in media advertising, such as newspapers, magazines, brochures, and other items which promote some product or service of its client to the general public, it is providing an exempt advertising service, and should not add sales tax to its charge to clients, but must pay the tax on its purchases from suppliers, including its purchases of typesetting.
Conversely, when the taxpayer provides graphic design for use on letterhead, envelopes, business cards and other business documents, it is not providing an exempt media advertising service, and must charge the tax on its total charge to customers. Under these circumstances the taxpayer may continue to purchase materials and supplies exempt of the tax under Form ST- 10.
When making bulk purchases of supplies which may be used in providing both exempt media advertising and in non-advertising, the taxpayer may purchase all of such supplies exempt of the tax for resale, but must then remit use tax on Form ST-7, on that portion of the items actually used in providing exempt advertising.
With regard to the taxpayer's sand-blasting business, when the taxpayer provides the glass necessary to perform sand-blasting, it is required to collect the tax on the total charge to its client. However the tax will not apply to the total charge for sand-blasting when its client provides it with the glass needed to complete the work.
The department is currently in the process of revising Retail Sales and Use Tax Regulation (VR) 630-10-3: Advertising. We will include you on our mailing list to receive information concerning any proposed changes to the regulation during the regulation revision process.
Please let the department know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner