Tax Type
Retail Sales and Use Tax
Description
Highway Department; Basis of Assessment
Topic
Taxability of Persons and Transactions
Date Issued
07-09-1970
I have received your letter of July 3, from which I quote:
"The Department of Taxation has determined that the four per cent (4%) sales tax is applicable to certain sales made by the Virginia Department of Highways. These include the sale of approximately 50,000 county maps at $0.10 per copy each year. In addition, money is collected for reproductions of plans, BW prints, road and bridge specifications, road design standards, enlarged county maps and the Virginia Manual of Uniform Traffic Control Devices. Most of these items are reproduced from drawings, designs, etc. as part of the work factor of the Department.
"There is no difficulty with the sale of items on which the tax may be passed to the purchaser. However, if the tax to be assessed against the Department is to be based on the gross amount resulting from all sales, a problem arises with regard to the sale of items on which the Department can collect no tax from the purchaser, e.g., county maps at $0.10 each.
"Accordingly, I would appreciate your opinion on two questions:
"1. Is the Department of Highways obligated to collect and pay the sales tax on the sales tax of these items?
"2. If so, on what basis will the tax be assessed?'
The General Assembly subjected the State to the Virginia Retail Sales and Use Tax Act by defining a person for purposes of the Act as including, "any . . . body politic or political subdivision, whether public or private, or quasi-public . . . .' Va. Code § 58-441.2(a). The State is exempted by § 58-441.6(p) from payment of the tax on purchases for its use or consumption. I am aware of no exclusion or exemption of the State from any other provision of the Act. Every person who "[s]ells at retail, or who offers for sale at retail . . . tangible personal property . . .' is a dealer, from whom the tax is collectible. Va. Code § 58-441.12(c). § 58-441.18 of the Code re-emphasizes this duty by providing:
"Notwithstanding any exemption from taxes which any dealer now or hereafter may enjoy under the Constitution or laws of this or any other state, or of the United States, such dealer shall collect such tax from the purchaser, consumer, or lessee and shall pay the same over to the Commissioner as herein provided.'
The basis upon which the tax will be assessed depends upon whether the tax is a use tax or a sales tax. To be liable for the sales tax, which would be based upon gross sales, the Department of Highways must be "engaged in the business of selling at retail . . . tangible personal property in this State.' Va. Code § 58-441.4. "Business' is defined by § 58-441.3(i) to include, "any activity engaged in by any person . . . with the object of gain, benefit or advantage, either direct or indirect.' It would normally be presumed that a State agency does not operate for "gain, benefit or advantage.' If, however, the price at which you sell such property includes a markup above cost, it is my opinion that the Department of Highways is engaged in business and the tax will be computed upon gross sales. If no attempt is made to realize a profit on the sales, I am of the opinion that the Department is liable only for the collection of the use tax upon each sale subject to the tax under § 58-441.51.
Attorney General's Opinion