Tax Type
Retail Sales and Use Tax
Description
Video production studio
Topic
Exemptions
Property Subject to Tax
Date Issued
03-04-1993
March 4, 1993
Re: §58.1-1821 Application: Retail Sales & Use Tax
Dear****************
This will reply to your letter of January 22, 1992 in which you seek correction of a sales and use tax assessment to your company,***********(the "Taxpayer"), for the period June 1988 through August 1991.
FACTS
The Taxpayer operates as a video production studio and creates video programs and television commercials. The Taxpayer appeals the sales tax assessed on the purchase of equipment used to create these videos and maintains that the equipment qualifies for the manufacturing exemption.
DETERMINATION
The department has previously ruled in P.D. 87-62 (2/27/87) (copy enclosed) that the production of audiovisual devices, etc. is nonindustrial in nature and thus does not qualify for the manufacturing exemption provided in Va. Code §58.1-608(A)(3)(b). The Taxpayer's manufacturing activities are generally secondary to the retail nature of the business and the services rendered in producing products. The secondary nature of the manufacturing is evidenced by the fact that tapes are custom produced (rather than mass marketed) to meet the needs of each customer, in much the same way that an artist or photographer carries on his trade.
In your letter you indicate that the Taxpayer has charged the tax on all sales to instate customers unless they provided an exemption certificate. You should note, however, that the taxability of the videos produced by the Taxpayer is dependent on whether the video is to be used in media or nonmedia advertising. If the video is for use in media advertising, it would be nontaxable. However, if it is for a non-media purpose (such as an in-house training film), the total charge for the production of the video, not just the charge for the tape, would be taxable. See the enclosed ruling letter, P.D. 89-332 (11/21/89), regarding the taxability of media and non-media advertising and sales to advertising agencies.
While presumably the tax should not have been collected on some transactions, Va. Code §58.1-625 requires any dealer collecting the sales or use tax on transactions exempt or nontaxable under the Retail Sales and Use Tax Act to transmit to the department the erroneously or illegally collected tax unless or until he can affirmatively show that the tax has since been refunded to the purchaser or credited to his account. Should the Taxpayer meet the above conditions, he may be eligible for a refund of taxes erroneously collected.
However, in light of the above, I can find no basis for revising the assessment. Thus, the assessment is due and payable. A revised Notice of Assessment with accrued interest will be mailed to the Taxpayer as soon as practicable.
Sincerely,
W. H. Forst Tax Commissioner
TPD/5949K
Rulings of the Tax Commissioner