Did a Virginia advertiser use postcards in the state when an out-of-state printer sent them directly into the mail?

Subject

Out-of-state printing and direct mailing did not create Virginia use by advertiser

Plain-English summary

Virginia removed direct-mail postcard purchases from an advertiser's use-tax audit because the advertiser did not use the printed matter in the Commonwealth. The Virginia company helped customers design postcards and identify recipients, then gave the mailing list to an out-of-state printer that printed and prepared the cards for mailing.

The advertiser said it never took possession or title in Virginia and exercised no right or power over the postcards there. Virginia agreed that an advertiser is the taxable consumer of property it uses in providing advertising services, but that status alone does not tax property for which no Virginia use occurred.

Section 58.1-604 required use within the state. Delivery from outside Virginia to a U.S. Post Office in Virginia did not establish the taxpayer's use on these facts. Virginia removed the qualifying direct-mail purchases from the audit and overturned Public Documents 05-10 and 07-110 to the extent they conflicted with this rule. Any remaining revised assessment still had to be paid.

What this means for you

• Advertising businesses can owe tax on materials they use in Virginia.
• Out-of-state fulfillment may avoid Virginia use tax when the advertiser never possesses, owns, or controls the printed property in the state.
• Mailing into Virginia is not necessarily the advertiser's own taxable use.
• The exact production, title, possession, control, and mailing arrangements matter.

Common questions

Were all audit items removed?

No. The ruling removed the contested exceptions representing postcards printed outside Virginia; it referred to a revised remaining bill.

Did the advertiser's Virginia customers and recipients make the purchase taxable?

Not by themselves. The ruling focused on whether the advertiser used the postcards in Virginia.

Which earlier rulings were superseded?

Public Documents 05-10 and 07-110, to the extent described.

Citations and references

• Va. Code § 58.1-604.
• Virginia Public Documents 05-10 and 07-110.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-72

Original ruling text

May 18, 2010

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 September 2002 through August 2008. I apologize for the delay in responding to your appeal.

FACTS

The Taxpayer is a Virginia corporation providing direct mail marketing services to businesses in Virginia. The Taxpayer's principal business is compiling "decks" of full-color advertising postcards that are plastic wrapped and mailed to homeowners in Virginia. The Taxpayer assists the customers in designing postcards and identifying target demographics, and then arranging for production and mailing of the postcards. The Taxpayer contracts with a printer located outside Virginia. The Taxpayer provides the printer with a mailing list. The printer prints the postcards and prepares them for mailing. The Taxpayer was assessed tax on the purchase of the printed materials from the out-of-state printer.

The Taxpayer contends that it is not liable for the sales and use tax on the postcards because it has not made use of the postcards in Virginia. The Taxpayer asserts that it never takes possession of or title to the postcards within Virginia, nor does it exercise any right or power over the postcards within Virginia. Citing several rulings issued by the Tax Commissioner, the Taxpayer contends that the delivery of printed matter by common carrier from outside Virginia to a U.S. Post Office in Virginia does not constitute taxable use of the printed matter within Virginia. The Taxpayer contends that the rulings issued in Public Documents 05-10 (2/3/05) and 07-110 (7/19/07) assert a different ruling regarding printing for advertising businesses.

DETERMINATION

Public Documents 05-10 and 07-110 are inconsistent with prior rulings of the Tax Commissioner as they relate to the purchase of printing by a Virginia advertiser from a printer located outside of Virginia. Virginia law deems an advertiser to be the taxable user and consumer of tangible personal property used in providing its advertising services, when the advertiser makes use of such property in Virginia. However, the advertiser would not be subject to the tax on tangible personal property for which it made no use in Virginia simply because of its status as an advertiser. The advertiser would only be subject to the use tax as authorized by Va. Code § 58.1-604, which requires use to occur within Virginia. Accordingly, to the extent that these public documents are inconsistent with the law and Department policy regarding the mailing of printed matter from outside of Virginia into Virginia, the public documents are overturned.

CONCLUSION

In accordance with this determination, the transactions included in the contested purchases exceptions list that represent the Taxpayer's purchases of the direct mail advertising postcards that were printed outside of Virginia will be removed from the audit. Once the revisions to the audit are complete, a revised bill, with interest accrued to date, will be mailed to the Taxpayer. No further interest will accrue provided the outstanding assessment is paid within 30 days from the date of the bill. The Taxpayer should remit payment to: Virginia Department of Taxation, Attention: *, 600 E. Main Street, 15 th Floor, Richmond, Virginia 23219. If you have any questions concerning payment of the assessment, you may contact at **.

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

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-2933399440.P

Supersedes P. D. s 05-10 and 07-110

Related Documents

05-10

07-110