Were Internet-downloaded music and a shower chair sold to an individual exempt from Virginia sales tax?

Subject

Downloaded music and an individual shower-chair purchase were exempt

Plain-English summary

Virginia removed both downloaded music and an individual purchaser's shower chair from the retailer's audit. The documentation showed that customers received the music electronically over the Internet, making it a nontaxable service transaction without an exchange of tangible personal property.

The shower chair also qualified. The cited durable-medical-equipment rule listed shower seating as an example, and the records showed the chair was sold to an individual for individual use.

What this means for you

• Document whether digital content is delivered entirely electronically or with tangible media.
• Keep product descriptions and delivery records for download transactions.
• Durable-medical-equipment relief can require both a qualifying product and purchase by or on behalf of an individual.
• Retain invoices identifying the individual purchaser and the specific exempt equipment.

Common questions

Was electronically downloaded music taxable?

No, under the law and facts applied in this ruling.

Did a shower chair count as durable medical equipment?

Yes. The regulation specifically included shower seating.

What happened to the audit?

Both categories were removed and the assessment was revised.

Citations and references

• Va. Code §§ 58.1-609.5(1) and 58.1-609.10(10).
• 23 VAC 10-210-940(F).
• P.D. 08-43.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 08-196

Original ruling text

December 19, 2008

Re: § 58.1-1821 Application: Retail Sales and Use Tax

Dear *:

This is in response to your letter submitted on behalf of * (the "Taxpayer") in which you seek correction of the retail sales and use tax assessment issued for the period February 2004 through January 2007.

FACTS

The Taxpayer operates as a seller of products via the Internet. Relying on Va. Code § 58.1-609.5 1, the Taxpayer contends that sales of electronic music, sold via the Internet, are statutorily exempt sales that are incorrectly assessed tax in the audit. Relying on Va. Code § 58.1-609.10 10, the Taxpayer further contends that the sale of a shower chair as durable medical equipment is statutorily exempt from the retail sales and use tax as well.

DETERMINATION

Downloaded Music

Virginia Code § 58.1-609.5 1 provides that the retail sales and use tax does not apply to "... services not involving an exchange of tangible personal property which provide access to or use the Internet and any other related electronic communication service, including software, data, content and other information services delivered via the Internet."

Pursuant to Public Document (P.D.) 08-43 (4/17/08), music downloaded via the Internet constitutes a nontaxable service transaction. In this instance, the Taxpayer has provided documentation demonstrating that the sales at issue are for music downloaded to its customers via the Internet. Pursuant to Va. Code § 58.1-609.5 1, and consistent with P. D. 08-43, these transactions were properly made exempt of the tax. Accordingly, these transactions will be removed from the audit assessment.

Durable Medical Equipment

Virginia Code § 58.1-609.10 10 provides, in pertinent part, that the retail sales and use tax does not apply to "... other durable medical equipment and devices..., when such items or parts are purchased by or on behalf of an individual for use by such individual. Durable medical equipment is equipment that (i) can withstand repeated use, (ii) is primarily and customarily used to serve a medical purpose, (iii) generally is not useful to a person in the absence of illness or injury, and (iv) is appropriate for use in the home."

Pursuant to Title 23 of the Virginia Administrative Code 10-210-940 F, shower seating is an example of durable medical equipment that is exempt of the tax. The documentation provided with respect to this sale indicates that the shower chair was sold to an individual. Based on the statute and regulation the shower chair may be sold exempt of the tax as durable medical equipment. Therefore, this transaction was properly made exempt of the tax and will be removed from the audit assessment.

CONCLUSION

The audit will be returned to the audit staff and adjusted based on this determination. Once the adjustments have been made, the Taxpayer will receive a revised bill with interest accrued to date. No additional interest will accrue provided the outstanding assessment is paid within thirty days of the date of the bill.

The Code of Virginia sections, regulation and public document cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website. If you have any questions about this determination, you may contact * in the Department's Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-2739931718.P