Rulings of the Tax Commissioner

October 26, 2023

Re: Request for Reconsideration: Retail Sales and Use Tax    

Dear *****:

This will respond to your letter in which you seek reconsideration of Public Document (P.D.) 23-74 (6/23/2023) and correction of the retail sales and use tax assessments issued to ***** (the “Taxpayer”) for the period September 2012 through August 2018. 

FACTS

The Taxpayer, an event venue in Virginia, included tangible personal property, such as tables and chairs, as a part of its venue rentals. The Taxpayer charged one lump sum amount for rental of the venue and any tangible personal property. 

During the Department’s audit, the Taxpayer did not provide any records, so assessments were issued based on the best available information. The Taxpayer appealed and the Department issued P.D. 20-28 (2/7/2020), determining that the assessments were properly issued. The Taxpayer was allowed one final opportunity to provide the necessary records. Subsequently, the Taxpayer provided additional information and the Department revised the assessments based upon the new information received. 

The Taxpayer appealed the revised assessments, alleging its transactions are not subject to Virginia’s retail sales and use tax because the provision of space is not taxable and any tangible personal property included in the transactions is not the true object of the transactions. In the alternative, the Taxpayer alleged the assessment should be reduced because only a portion of the transactions are taxable, and the Taxpayer should be liable for tax only after the business entity was formed and began operations. 

The Department issued P.D. 23-74, upholding the assessment of tax after the Taxpayer began operations. The Department determined that the Taxpayer’s transactions were taxable because of the inclusion of tangible personal property, and that the “true object test” was not applicable because the transactions did not involve the provision of a service. The Taxpayer timely requests reconsideration, arguing that fees charged for the use of certain real estate facilities represents a nontaxable service for retail sales and use tax purposes, and any tangible personal property included was not the true object of the transactions.

DETERMINATION

A taxpayer who disagrees with the Tax Commissioner’s final determination issued pursuant to Virginia Code § 58.1-1822 may request a reconsideration of the determination. Such request, however, must meet one of the four following requirements:

a.The facts upon which the original determination is based are misstated by the Tax Commissioner or are inaccurate, and the determination would have different result based on a correction of the Tax Commissioner’s misstatement of the facts presented of a clarification of the original facts presented in the taxpayer’s administrative appeal; 
b.The law upon which the original determination is based has been changed by legislation, court decision or other authority effective for the tax period(s) at issue;
c.The policy upon which the original determination is based is misapplied, and the determination would have a different result based on the application of the proper policy; or 
d.The taxpayer has discovered additional evidence or documentation that was not available to the taxpayer at the time the original administrative appeal was filed with the department, and the additional evidence or documentation could produce a result different from the original determination.

In this case, the Taxpayer cites subsections (a) and (c) in support of its request for reconsideration. The Taxpayer argues that the Department’s policy, outlined in P.D. 02-38 (4/1/2002), and P.D. 12-82 (5/1/2012) considers the rental of certain real estate facilities a nontaxable service. However, both cases cited by the Taxpayer specifically state that the transactions at issue do not involve the rental of tangible personal property and explain that transactions involving the exchange of tangible personal property are subject to the tax. 

Accordingly, the Department did not misstate the facts or misapply the law or policy in upholding the Taxpayer’s assessment because its transactions included the provision of tables and chairs. The assessment at issue is upheld and remains due and payable. The Taxpayer will receive an updated bill with accrued interest to date shortly. The Taxpayer should remit the amount due within 60 days of the date on the updated bill to avoid the accrual of additional interest and possible collection action. 

The Code of Virginia sections and public documents cited are available online at www.tax.virginia.gov in the Laws, Rules, & 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 (804) *****, or via email at *****@tax.virginia.gov.

Sincerely,

Craig M. Burns
Tax Commissioner

                    
AR/4669-C