Tax Type
Retail Sales and Use Tax
Description
Services-professional or personal; Billing services
Topic
Taxability of Persons and Transactions
Date Issued
02-13-1997
February 13, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear*****************
This will reply to your recent letters in which you seek correction of the retail sales and use tax audits of*********************** (the "Taxpayers") for the periods of October 1993 through August 1996, and October 1993 through June 1996, respectively.
FACTS
The Taxpayers provides computer printing and mailing services for customers. One aspect of the Taxpayer's business is providing billing services. This entails the transmittal of customer billing information to the Taxpayer by modem. The Taxpayer then downloads the information to their system, prints, sorts, and mails the billing to the respective recipient, largely consisting of Virginia residents. The customer also furnishes the paper stock used for printing the bills and each bill is individually unique in its content. The auditor assessed tax on the above transactions as the sale of tangible personal property. The Taxpayer takes the position that they are providing an exempt service and not selling tangible personal property.
DETERMINATION
Code of Virginia § 58.1-609.5(1) provides an exemption from the retail sales and use tax for "professional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made...".
Virginia Regulation (VR) 630-10-97.1 which interprets the above statutory provision explains that for purposes of distinguishing whether a particular transaction constitutes an exempt service or a taxable retail sale, the "true object" of the transaction must be examined. If the object of the transaction is to secure a service and the tangible personal property which is transferred is not critical to the transaction, then the transaction may constitute an exempt service. If the object of the transaction is to secure the property it produces, then the entire charge is taxable.
Based on the information provided, and the regulation cited above, the true object of the transaction in question is the manipulation of the customer provided data and the subsequent mailing service. The department has traditionally held that the printing of multiple documents of a like nature qualify as the sale of tangible personal property, even when such printing is performed on customer owned paper stock. This situation is differentiated from this analysis by the fact that the Taxpayer performs data manipulation which renders each billing document unique for each recipient. This renders this transaction an exempt service and not the provision of tangible personal property.
Based on all of the above, the audit will be adjusted accordingly. If you should have any questions, please contact *********, Office of Tax Policy, at**************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12097K
Rulings of the Tax Commissioner