Tax Type
Retail Sales and Use Tax
Description
Advertising; Placement of advertising space
Topic
Taxability of Persons and Transactions
Date Issued
04-23-1996
April 23, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear*************
This will reply to your letter of September 12, 1995, in which you seek a ruling on the application of the sales and use tax to your business, ****** (the "Taxpayer").
FACTS
The Taxpayer will be selling advertising space for placement in a directory or image book (the "Directory") to members of various chambers of commerce throughout Virginia. The Directory will be printed and distributed to the chambers of commerce at no charge. The chambers will then distribute the directories to the general public. The Taxpayer will pay the chambers of commerce a commission of ten to fifteen percent of the gross advertising charges for their particular Directory.
The Taxpayer wishes to know if sales tax should be collected on its advertising charges to chamber of commerce members. The Taxpayer also wishes to know the correct application of the tax to charges for printing the directories.
RULING
Virginia Regulation (VR) 630-10-3 (copy enclosed) defines an advertising business to be ".... any person or group of persons providing 'advertising' as defined herein." Advertising is defined as ".... the planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting or other media, ...." This same regulation states that "The tax does not apply to charges by an advertising business for professional services in the planning, creating or placing of advertising in newspapers, magazines, ...." Based on the information provided, the Taxpayer is an advertising business and its charges to chamber of commerce members for the placement of advertising in the Directory would not be subject to sales tax.
VR 630-10-3 also discusses the application of the tax to purchases made by advertising businesses and states that ".... the tax applies to all purchases by an advertising business ...." Printed materials are included in the taxable items listed in this section. The Taxpayer should pay the sales tax to the printer on charges for printing the Directories. If the sales tax is not charged, the Taxpayer should accrue use tax on the cost of the printing by filing Form ST-7, Consumer's Use Tax Return, with the department.
The Taxpayer should note that an exemption for sales of printing to Virginia advertising businesses for distribution out-of-state was enacted in the 1995 session of the Virginia General Assembly. If the Taxpayer's business should expand outside the state of Virginia, then its purchase of directories that are shipped to chambers of commerce in other states would be exempt. I have enclosed a copy of Virginia Tax Bulletin 95-5 which explains this law change.
I trust the foregoing has answered your questions, but if you need additional assistance please contact **** in the Office of Tax Policy at********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10223S
Rulings of the Tax Commissioner