December 22, 2016
Re: § 58.1-1821 Application: Litter Tax
Dear *****:
This will reply to your letter in which you contest the litter tax assessments issued to your client, ***** (the “Taxpayer”), for tax years 2009 through 2015.
FACTS
The Taxpayer is an auto body shop located in Virginia. As an auto body shop, the Taxpayer repairs auto bodies that have been damaged as a result of an accident. In the process of making auto body repairs, the Taxpayer replaces auto parts that have been damaged. The Taxpayer believes that the transfer of auto repair parts to its customer is incidental to the service provided in repairing automobile bodies and, therefore, its business operation is not subject to the Virginia litter tax. The Taxpayer requests that the litter tax assessments for tax years 2009 through 2015 be abated.
DETERMINATION
Virginia Code § 58.1-1707(A) states, in part, that the litter tax is imposed on, “every person in the Commonwealth engaged in business as a manufacturer, wholesaler, distributor or retailer of products enumerated in § 58.1-1708 an annual litter tax of $10 for each establishment from which such business is conducted.” Virginia Code § 58.1-1708 provides a listing of products for which a manufacturer, wholesaler, distributor or retailer selling such products would be subject to the annual litter tax. Included in this listing are motor vehicle parts.
Virginia Code § 46.2-100 defines “Motor vehicle” to mean “every vehicle as defined in this section that is self-propelled or designed for self-propulsion except as otherwise provided in this title. . . .”
Title 26 Code of Federal Regulations § 48.4061(b)-2 defines, in part, “motor vehicle parts or accessories” to include “any article the primary use of which is to improve, repair, replace, or serve as a component part of an automobile truck or bus chassis or body, or other automobile chassis or body, or taxable tractor. . . .”
The Taxpayer is of the opinion that, based on information provided on the Department's website, “motor vehicle parts” would qualify as incidental taxable sales made by auto body repair shops. This opinion is based on the following language addressing the application of the litter tax provided on the website:
The litter tax does not apply to businesses where the sale or distribution of taxable products is incidental to normal business operations, such as establishments that sell snack items and soft drinks as a convenience to customers. Other examples include nursing homes, hospitals (excluding gift shops and cafeterias), dry cleaners, Laundromats, antiques shops, repair garages, and companies that maintain “honor system” boxes.
Based on the language relied on by the Taxpayer and provided above, “incidental” items include items sold by an establishment that are not generally held by the establishment for use in providing its primary business purpose. It is the Department's position that motor vehicle parts are not incidental taxable sales when sold by an auto body shop or a repair garage. This policy and position is upheld in Public Document (P.D.) 98-52 (03/16/1998), in which the Tax Commissioner ruled that a business selling and installing upholstery, vinyl tops, and auto glass would be subject to the annual litter tax.
Based on all of the above, the Taxpayer sells and installs automobile parts and accessories in the repair of automobile bodies that have been damaged as a result of an accident. Pursuant to Va. Code § 58.1-1707(A), the Taxpayer is subject to the litter tax. Accordingly, the litter tax assessments for the tax years 2009 through 2015 are correct. Updated bills with interest accrued to date will be mailed to the Taxpayer. The bills should be paid within 30 days of the date of the assessments to avoid the accrual of additional interest. If payment is not received within 30 days, additional interest will accrue on the outstanding balances and collection action will begin.
The Code of Virginia sections and public document cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's website. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/821.T