Tax Type
Retail Sales and Use Tax
Description
Agriculture; Vaccination machinery
Topic
Taxability of Persons and Transactions
Date Issued
11-27-1996
November 27, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear*************
In your letter, you request a ruling concerning the application of the retail sales and use tax to vaccination machines leased by your client (the Lessor) to poultry producers (the Lessee). Copies of all references are enclosed.
FACTS
The Lessor installs these machines in poultry hatcheries where they are used by each Lessee to vaccinate embryos of avian species by injection. Each Lessee must constantly replace certain component parts of the machine, such as disposable needles, punches and tubing. The Lessee must also use a sterilizing agent to sanitize needles between injections.
At no additional cost to the Lessee, the Lessor will train the hatchery's employees to operate the machinery and to replace the disposable components. The Lessor maintains the machinery on a regular basis and repairs it when necessary. If the cause of the repair is due to the Lessee's negligence or fault, the Lessee is responsible for paying the cost of repair parts and labor.
The Lessor is compensated monthly based on the total number of eggs injected in a month using a set rate for each egg injection. Disposable items are furnished by the Lessor at no additional charge. A separate charge is made by the Lessor for any vaccines, antibiotics and other biological products sold to its customers for use in poultry production.
You ask whether the gross proceeds received from the lease are subject to the tax or qualify for the agricultural exemption provided by Code of Virginia §58.1-609.2(1). You also ask whether the agricultural exemption applies to the disposable items furnished under the lease and to repair parts purchased by the lessee. In addition, you ask whether charges for vaccines and disinfectants are subject to the tax.
RULING
General Rule is Taxation. Code of Virginia §58.1-603 imposes the sales tax on every person who sells or leases or rents tangible personal property in Virginia. Code of Virginia § 58.1-602 defines a sale to mean "any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property...for a consideration." This statute also defines a lease or rental to mean "the leasing or renting of tangible personal property and the possession or use thereof by the lessee or renter for a consideration, without transfer of the title to such property."
In this case, the Lessor engages in a transaction in which possession of vaccination machinery is transferred to others for compensation. Accordingly, the Lessor's transactions constitute the lease or rental of tangible personal property subject to taxation, unless an exemption applies.
Exemptions are the Exceptions. Code of Virginia § 58.1-609.2(1) provides an exemption from the retail sales and use tax for:
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- Commercial feeds;...breeding and other livestock;...baby chicks; turkey poults;... quail;...agricultural chemicals;...farm machinery;...and agricultural supplies provided the same are sold to and purchased by farmers for use in agricultural production,...for market.
- Commercial feeds;...breeding and other livestock;...baby chicks; turkey poults;... quail;...agricultural chemicals;...farm machinery;...and agricultural supplies provided the same are sold to and purchased by farmers for use in agricultural production,...for market.
When claiming this exemption, each farmer must complete and sign the certificate of exemption, Form ST-18, and furnish it to the Lessor. The Lessor is required to maintain and preserve each exemption certificate accepted in good faith for a minimum of three years.
Of related importance, please see P.D. 94-152 (5116194). If you have any questions about this ruling, please contact*****************at****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11259R
Rulings of the Tax Commissioner