Tax Type
Retail Sales and Use Tax
Description
Services; Miscellaneous service enterprises; Taxation of custom mailing lists.
Topic
Taxability of Persons and Transactions
Date Issued
03-10-1998
March 10, 1998
Dear*************:
This is in reply to your letter of November 6, 1997, in which you request a ruling regarding the application of the retail sales and use tax to the purchase of custom mailing lists.
FACTS
The purchaser obtains mailing lists from third parties for purposes of mailing promotional materials. The purchaser accepts delivery in Virginia of a tape or disk containing the list. Delivery is accepted either through an employee located in Virginia or through an independent agent in Virginia acting on behalf of the purchaser. The employee or agent will then transfer the list electronically to the purchaser's offices located outside Virginia.
The mailing lists purchased are derived from a data base of names maintained by the list seller or by a service bureau acting for the list seller. The list sellers own the data base of names, and most often the names in the data base are obtained in the regular course of the sellers' business. The list sellers formulate the list according to the purchaser's specifications. Except in rare instances, every list of names sold will differ despite the fact that the names are selected from the same data base. The data base itself is also subject to change.
You request a ruling that the purchaser's acquisition of a tape or disk containing a customized mailing list (i.e., compiled according to the purchaser's specifications) will not be subject to Virginia sales tax when the purchaser (or its agent) takes possession of the tape or disk in Virginia.
RULING
Code of Virginia Sec. 58.1-609.5(1) provides an exemption from the sales and use tax for ``[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made.' In a ruling letter dated May 28,1985 (copy enclosed), the department determined that mailing and telephone lists that are specially designed (``customized') to a particular client's needs are exempt from the tax, as the true object of the transaction is the acquisition of the services of the seller. Mailing lists not customized to a buyer's specifications, however, are subject to the tax as the production of such lists by the seller does not involve a special service element.
In addition, Title 23 of the Virginia Administrative Code (VAC) 10-210-4040 (copy enclosed) explains that, in instances where both the services rendered and the property transferred are critical elements of a transaction, the degree of customization, uniqueness or specific services provided in connection with the product are considered in determining its appropriate tax status. The regulation states that information conveyed via tangible means (e.g., diskette, computer tape, etc.) generally is taxable except for information customized to a particular customer's needs and sold to that particular customer. In instances where no special or customized services are involved in providing the tangible personal property, the transaction is taxable and tax is computed on the total sales price charged to the customer.
I trust this will respond to your inquiry. If you have additional questions regarding this matter, you may contact ***** of the department's Office of Tax Policy at *****.
Dear*************:
This is in reply to your letter of November 6, 1997, in which you request a ruling regarding the application of the retail sales and use tax to the purchase of custom mailing lists.
FACTS
The purchaser obtains mailing lists from third parties for purposes of mailing promotional materials. The purchaser accepts delivery in Virginia of a tape or disk containing the list. Delivery is accepted either through an employee located in Virginia or through an independent agent in Virginia acting on behalf of the purchaser. The employee or agent will then transfer the list electronically to the purchaser's offices located outside Virginia.
The mailing lists purchased are derived from a data base of names maintained by the list seller or by a service bureau acting for the list seller. The list sellers own the data base of names, and most often the names in the data base are obtained in the regular course of the sellers' business. The list sellers formulate the list according to the purchaser's specifications. Except in rare instances, every list of names sold will differ despite the fact that the names are selected from the same data base. The data base itself is also subject to change.
You request a ruling that the purchaser's acquisition of a tape or disk containing a customized mailing list (i.e., compiled according to the purchaser's specifications) will not be subject to Virginia sales tax when the purchaser (or its agent) takes possession of the tape or disk in Virginia.
RULING
Code of Virginia Sec. 58.1-609.5(1) provides an exemption from the sales and use tax for ``[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made.' In a ruling letter dated May 28,1985 (copy enclosed), the department determined that mailing and telephone lists that are specially designed (``customized') to a particular client's needs are exempt from the tax, as the true object of the transaction is the acquisition of the services of the seller. Mailing lists not customized to a buyer's specifications, however, are subject to the tax as the production of such lists by the seller does not involve a special service element.
In addition, Title 23 of the Virginia Administrative Code (VAC) 10-210-4040 (copy enclosed) explains that, in instances where both the services rendered and the property transferred are critical elements of a transaction, the degree of customization, uniqueness or specific services provided in connection with the product are considered in determining its appropriate tax status. The regulation states that information conveyed via tangible means (e.g., diskette, computer tape, etc.) generally is taxable except for information customized to a particular customer's needs and sold to that particular customer. In instances where no special or customized services are involved in providing the tangible personal property, the transaction is taxable and tax is computed on the total sales price charged to the customer.
I trust this will respond to your inquiry. If you have additional questions regarding this matter, you may contact ***** of the department's Office of Tax Policy at *****.
Rulings of the Tax Commissioner