Tax Type
Retail Sales and Use Tax
Description
Magazine publisher; Computer list and mailing labels; Photographs
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
04-30-1990
April 30, 1990
Re: Request for Ruling/ Sales and Use Tax
Dear*********************
This will reply to your recent letters requesting a ruling on the application of the sales and use tax to tangible personal property used in producing your publication.
FACTS
****************** (taxpayer) publishes a monthly magazine on bluegrass music. In connection with publication of its magazine, the taxpayer purchased a computer to maintain the taxpayer's subscriber mailing list and generate labels used to mail the magazine to subscribers. In addition, the taxpayer incurs charges for film processing, photographic prints and blank mailing labels.
The taxpayer requests a ruling whether the above tangible personal property may be purchased exempt of the sales and use tax and whether the tax previously paid may be refunded for those items which qualify for exemption.
RULING
Generally
§58.1-608(3)(b) of the Code of Virginia sets forth the sales and use tax industrial manufacturing exemption; Virginia Regulation 630-10-63 interprets this Code section. The exemption contained in this statute extends also to businesses engaged primarily in publishing newspapers or magazines.
§58.1-608(3)(b)(v) of the Code of Virginia exempts from the sales and use tax equipment, printing or supplies used directly to produce a publication issued at regular intervals not exceeding three months. Virginia Regulation (VR) 630-10-73 defines "publication," for the purposes of the above exemption, as "any written compilation of information available to the general public...[but] does not include general reference materials and their periodic updates."
§A(7) of VR 630-10-63, copy enclosed, provides an exemption for:
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- "[t]angible personal property used directly in those necessary ancillary activities of newspaper and magazine printing when such activities are performed by the publisher of any newspaper or magazine for sale daily or at average intervals not exceeding three months..." Emphasis added.
- "[t]angible personal property used directly in those necessary ancillary activities of newspaper and magazine printing when such activities are performed by the publisher of any newspaper or magazine for sale daily or at average intervals not exceeding three months..." Emphasis added.
The term "administration" is defined in §C(1) as "the managerial, sales, and nonoperational aspects of manufacturing and processing operations and includes management, selling and marketing, employee comfort and convenience, and record keeping. Tangible personal property used in administration is subject to the tax..."
Labels
Virginia Code §58.1-608(3)(b)(iv) exempts from the sales and use tax "materials, containers, labels, sacks, cans, boxes, drums or bags for future use for packaging tangible personal property for shipment or sale." Emphasis added.
Based on the above provision, the taxpayer may purchase exempt of the tax the labels used in mailing its magazine to subscribers. The taxpayer should provide its supplier with a sales and use tax certificate of exemption, Form ST-11, copy enclosed.
Photographic Prints
The taxpayer purchases photographic prints for incorporation into the magazine being sold. As the pictures are for direct use in the taxpayer's magazine, the charges for prints (including any associated processing charges) actually used in the magazine are not subject to the tax. However, the prints which are not utilized in the magazine are taxable. In addition, please note that the camera film and supplies used in taking such photographs may not be purchased exempt of the tax as they are used in preproduction activities.
Computer
Applying the facts in this case to the provisions set forth in VR 630-10-63 above, the taxpayer's computer is used in a taxable administrative activity when used to maintain its subscriber mailing list. However, the computer is used in an exempt activity when used to produce the magazine labels.
For items used in both taxable and exempt manufacturing activities, §D of VR 630-10-63 provides that,
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- When a single item of tangible personal property is put to use in two different activities, one of which is an immediate part of the industrial production process (exempt) and the other of which is not (taxable), the sales and use tax shall apply in full when the preponderance of the item's use (fifty percent or more) is in nonexempt activities. Likewise, the item will be totally exempt from tax if the preponderance of its use is in exempt production activities.
- When a single item of tangible personal property is put to use in two different activities, one of which is an immediate part of the industrial production process (exempt) and the other of which is not (taxable), the sales and use tax shall apply in full when the preponderance of the item's use (fifty percent or more) is in nonexempt activities. Likewise, the item will be totally exempt from tax if the preponderance of its use is in exempt production activities.
Refunds
You may obtain a refund of tax previously paid on those items which qualify for exemption. A properly completed sales and use tax certificate of exemption, Form St-11, and any applicable invoices and receipts should be presented to the seller of the items in question. However, pursuant to Va. Code §58.1-1823, any claim for refund must be made within three years from the due date of the tax.
I hope this has answered your questions; however, please contact the department if you have additional questions or if we may be of any further assistance.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner