Sales Tax State Activity Update - September 2005

Virginia Taxes Customized Giveaways

The Virginia tax Commissioner recently ruled that separately stated fees for embroidery, silkscreen and art services provided in connection with the sale of tangible personal property were taxable.

Background
When selling its products the taxpayer will embroider, silkscreen or use other methods to add specialty advertising to customize products. In a letter to the Tax Commissioner the taxpayer sought a correction to a sales and use tax assessment in which tax was assessed on the services.

Ruling
The taxpayer contends the amounts stated on the invoice represent charges for labor only and are therefore exempt. The Tax Commissioner determined the services were taxable pursuant to Virginia Code Section 58.1-602, which defines sales price to include the services provided by the taxpayer. In pertinent part, Section 58.1-602 states "the total amount for which tangible personal property or services are sold, including any services that are a part of the sale". In this case, the services were performed in conjunction with sale of taxable tangible personal property and not contracted for on a separate basis.

View the full notice here.

(Ruling of Commissioner, P.D. 05-127, Virginia Department of Taxation, 8/02/05)

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