I hired an out-of-state vendor to create and mail marketing materials directly to potential customers in Virginia — do I owe Virginia use tax on that service?

Plain-English summary

An insurance company with multiple Virginia locations was audited for May 2017 through April 2020 (its first-ever, "first-generation" audit) and assessed use tax on its purchase of direct mail advertising services from an out-of-state vendor. The company appealed, arguing the charge should be exempt advertising.

Advertising is generally exempt — and direct mail counts as advertising media. Virginia Code § 58.1-609.6 5 exempts advertising from sales and use tax. The statutory definition of "advertising" in § 58.1-602 covers planning, creating, or placing marketing material in "newspapers, magazines, billboards, broadcasting and other media," and the implementing regulations make clear that "media" specifically includes direct mail. Ordinarily, a business that PROVIDES advertising services is treated as the user/consumer of the materials it uses to create that advertising — meaning the advertising provider, not its client, typically absorbs any tax on those materials, not the client who hired it.

But the real question here was USE, not just the advertising label. Separately from the general advertising exemption, the Department has long held (P.D. 93-41, P.D. 10-72) that when an out-of-state advertiser creates and mails marketing pieces directly to their recipients — without ever routing the printed materials through the Virginia client — the Virginia business itself never makes any USE of those materials within Virginia. Because Virginia's use tax is triggered by use of tangible personal property IN Virginia, no use tax applies to the charge for that out-of-state service if the client never handles or uses the printed pieces here.

How this played out. The insurer gave its vendor a list of potential customers and independent brokers, and the vendor created, printed, and mailed the marketing materials directly to those Virginia recipients — the insurer itself never touched, mailed, or otherwise used the printed pieces. Because the company had no in-Virginia use of the direct mail materials, the Department found the use tax assessment on this charge was erroneous. It ordered the direct mail exceptions removed from the audit, with the case returned to field audit staff for a revised report and a refund (plus applicable refund interest) once the recalculation was complete.

What this means for you

Businesses that outsource direct mail marketing

If your out-of-state advertising vendor handles the entire process — creating, printing, AND mailing directly to your Virginia customer or prospect list — you likely never "use" those materials in Virginia yourself, which keeps the charge outside Virginia's use tax even though the mail lands in Virginia mailboxes.

If your vendor routes materials back through you first

This exemption turned on the fact that the insurer never received or handled the printed pieces before they reached recipients. If your process instead has the vendor ship materials to YOU for internal review, distribution, or use before they go out, that could change the use-tax analysis — check your actual workflow against this fact pattern before assuming the same result applies.

Accountants and tax professionals

Keep the general advertising exemption (§ 58.1-609.6 5, covering the advertising provider's own materials) analytically separate from this "no use in Virginia" line of authority (P.D. 93-41, P.D. 10-72), which applies specifically to purchasers of direct mail services from out-of-state vendors. Both point to the same non-taxable result here, but they're different legal theories worth citing precisely.

Common questions

Q: Is all direct mail advertising exempt from Virginia sales and use tax?
A: Direct mail is included in the statutory and regulatory definition of exempt "advertising" media, but this specific ruling turned on a related, separate point: the Virginia purchaser never used the printed materials within Virginia because the out-of-state vendor mailed them directly to recipients.

Q: Would the result change if the insurer had reviewed or handled the mail pieces before they went out?
A: The ruling doesn't address that scenario directly, but the reasoning depends on the Virginia business never using the materials in Virginia — any handling or use within the state could change the analysis.

Q: What did the Department actually order?
A: It directed that the direct mail charges be removed from the audit's taxable exceptions, with a revised audit report and a refund (plus refund interest) to follow.

Citations and references

Statutes and regulations:

• Va. Code § 58.1-609.6 5 — exemption from sales and use tax for advertising
• Va. Code § 58.1-602 — definition of "advertising"; provider deemed the user/consumer of materials
• 23 VAC 10-210-40 — definition of "media," including direct mail
• 23 VAC 10-210-41 A — advertising-business charges for direct mail (and other media) are not taxed

Prior rulings the Department relied on (described here, not linked): P.D. 93-41 (3/4/1993) (out-of-state catalog printer/mailer; no Virginia use by the client) and P.D. 10-72 (5/18/2010) (same principle).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 25-19

Original ruling text

February 12, 2025

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 May 2017 through April 2020.

FACTS

An audit was conducted on the books and records of the Taxpayer, an insurance provider with multiple locations in Virginia, for the period at issue. As a result of a first-generation audit, the Taxpayer was assessed use tax on its purchase of direct mail services from an out-of-state vendor. The Taxpayer filed an application for correction contending that the exceptions for direct mail services were exempt advertising.

DETERMINATION

Virginia Code § 58.1-609.6 5 provides that the retail sales and use tax shall not apply to advertising. Virginia Code § 58.1-602 defines advertising as:

…the planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting and other media , including, without limitation, the providing of concept, writing, graphic design, mechanical art, photography and production supervision. Any person providing advertising as defined in this section shall be deemed to be the user or consumer of all tangible personal property purchased for use in such advertising. [Emphasis added.]

Title 23 of the Virginia Administrative Code (VAC) 10-210-40 defines the term “media” to include “newspapers, magazines, billboards, direct mail , radio, television, and other modes of communication.” [Emphasis added.] In addition, Title 23 VAC 10-210-41 A provides that:

The tax does not apply to charges by an advertising business for professional services in the planning, creating or placing of advertising in newspapers, magazines, billboards, direct mail , radio, television, or other media regardless of how such charges are computed by the advertising business and whether or not such business actually places the advertising in the media.

In Public Document (P.D.) 93-41 (3/4/1993), the Department concluded that a tax was erroneously assessed against a mail order company that had catalogs printed in another state and mailed by the printer to customers and potential customers within Virginia because it made no use of the catalogs in Virginia. See also P.D. 10-72 (5/18/2010).

In the present case, the Taxpayer provided a potential customer list to a vendor, which created, printed, and mailed marketing material to potential small company customers and independent brokers in Virginia. Because the Taxpayer neither mailed nor had use of the printed materials in Virginia, it was not subject to sales and use tax on the charges for the service.

Based upon this determination, the exceptions for the purchases of direct mail advertising provided by the out-of-state vendor will be removed from the audit. The audit will be returned to the appropriate field audit staff for adjustment. The Taxpayer has paid the assessment in full. Once the revisions to the audit are complete, a revised report and a refund will be issued for any overpayment along with any refund interest as applicable.

The Code of Virginia sections and regulations cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If there are any questions regarding this determination, please contact * in the Department’s Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at , or via email at **@tax.virginia.gov.

Sincerely,

James J. Alex

Tax Commissioner

Commonwealth of Virginia

AR\4653.F

Related Documents

93-41

10-72

22-99