Tax Type
Retail Sales and Use Tax
Description
Ships and vessels; Pollution containment equipment; Vessel supplies
Topic
Collection of Delinquent Tax
Taxability of Persons and Transactions
Date Issued
05-17-2000
May 17, 2000
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This is in response to your letter of March 14, 2000, requesting correction of the retail sales and use tax audit assessment issued to ***** (the "Taxpayer"). Copies of cited resources are enclosed.
FACTS
As a result of an audit for the period November 1995 through December 1998, the Taxpayer was assessed use tax on various untaxed purchases of tangible personal property used in its business. The Taxpayer maintains that equipment and supplies used for oil spill containment, clean up, and towing qualify for the exemption set out in Code of Virginia § 58.1-609.3(4). The Taxpayer also maintains that this exemption should apply to certain property held in the audit which the Taxpayer claims is permanently installed on tugs and barges.
DETERMINATION
In the prior audit, the Taxpayer raised virtually the same issues as are presented in this appeal. For example, the Taxpayer contested the use tax assessed on oil spill containment and clean up equipment, wires and related towing equipment, and mooring lines. Based on the rules of strict construction, I determined that the exemption set out by Code of Virginia § 58.1-609.3(4) was not applicable to those items. See Public Document (P.D.) 97-36 (1/27/97).
I would note that the exemption was expanded in 1996 to exempt dredges, attendant vessels thereof, and fuel and supplies for use or consumption aboard dredges or the attendant vessels. However, such dredging exemption does not apply to the Taxpayer's operations, as it is not engaged in dredging interstate channels.
Based on the foregoing and all of the reasons set out in my previous letter to the Taxpayer, the use tax assessed on the equipment and supplies for oil spill containment, clean up, and towing is properly assessed in the current audit. In regard to the Taxpayer's repair/replacement parts issue, l find that none of these items can be deemed component parts of the vessels. Such items as portable heaters, life rafts, vests, ring buoys, eyewash stations, washers and dryers, slings, whistles, hand-held fire extinguishers, strobes, etc., constitute supplies. Although used aboard vessels, the Taxpayer has not established that these items are welded or otherwise permanently attached to the ship's structure as to constitute a component part of the ship or vessel.
Therefore, l find no basis to revise the tax assessed in the present audit of the Taxpayer. This determination is consistent with P.D. 97-95 (12/30/97) and my prior letter to the Taxpayer. I also find no basis to waive the audit penalty, as the Taxpayer failed to report and pay any consumer use tax during the audit period.
The current balance due on $*****. To preclude further interest charges, the Taxpayer must remit full payment of the outstanding balance within 30 days from the date of this letter. Such payment should be sent to the attention of ***** in the department's Office of Tax Policy, Post Office Box 1880, Richmond, Virginia 23218-1880, within the allotted time.
If you have any questions about this response, please contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/27853R
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This is in response to your letter of March 14, 2000, requesting correction of the retail sales and use tax audit assessment issued to ***** (the "Taxpayer"). Copies of cited resources are enclosed.
FACTS
As a result of an audit for the period November 1995 through December 1998, the Taxpayer was assessed use tax on various untaxed purchases of tangible personal property used in its business. The Taxpayer maintains that equipment and supplies used for oil spill containment, clean up, and towing qualify for the exemption set out in Code of Virginia § 58.1-609.3(4). The Taxpayer also maintains that this exemption should apply to certain property held in the audit which the Taxpayer claims is permanently installed on tugs and barges.
DETERMINATION
In the prior audit, the Taxpayer raised virtually the same issues as are presented in this appeal. For example, the Taxpayer contested the use tax assessed on oil spill containment and clean up equipment, wires and related towing equipment, and mooring lines. Based on the rules of strict construction, I determined that the exemption set out by Code of Virginia § 58.1-609.3(4) was not applicable to those items. See Public Document (P.D.) 97-36 (1/27/97).
I would note that the exemption was expanded in 1996 to exempt dredges, attendant vessels thereof, and fuel and supplies for use or consumption aboard dredges or the attendant vessels. However, such dredging exemption does not apply to the Taxpayer's operations, as it is not engaged in dredging interstate channels.
Based on the foregoing and all of the reasons set out in my previous letter to the Taxpayer, the use tax assessed on the equipment and supplies for oil spill containment, clean up, and towing is properly assessed in the current audit. In regard to the Taxpayer's repair/replacement parts issue, l find that none of these items can be deemed component parts of the vessels. Such items as portable heaters, life rafts, vests, ring buoys, eyewash stations, washers and dryers, slings, whistles, hand-held fire extinguishers, strobes, etc., constitute supplies. Although used aboard vessels, the Taxpayer has not established that these items are welded or otherwise permanently attached to the ship's structure as to constitute a component part of the ship or vessel.
Therefore, l find no basis to revise the tax assessed in the present audit of the Taxpayer. This determination is consistent with P.D. 97-95 (12/30/97) and my prior letter to the Taxpayer. I also find no basis to waive the audit penalty, as the Taxpayer failed to report and pay any consumer use tax during the audit period.
The current balance due on $*****. To preclude further interest charges, the Taxpayer must remit full payment of the outstanding balance within 30 days from the date of this letter. Such payment should be sent to the attention of ***** in the department's Office of Tax Policy, Post Office Box 1880, Richmond, Virginia 23218-1880, within the allotted time.
If you have any questions about this response, please contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/27853R
Rulings of the Tax Commissioner