Tax Type
Retail Sales and Use Tax
Description
Automotive Glass Shop: Untaxed Tangible Personal Property purchases
Topic
Property Subject to Tax
Date Issued
12-12-2001
December 12, 2001
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****
This is in response to your letter requesting correction of the sales and use tax assessment issued to ***** (the "Taxpayer") as a result of an audit.
FACTS
The Taxpayer is engaged primarily in repairing and replacing automotive glass for individuals and businesses. An audit for the period March 1997 through January 2000 resulted in the assessment of use tax on untaxed purchases of tangible personal property for its operations.
The Taxpayer takes exception to the use tax assessed on the cost price of urethane and other adhesives transferred to its customers. The Taxpayer maintains that it collects the sales tax on these products at the time of repair. The Taxpayer further maintains that its treatment is consistent with the policy set out in Public Document ("P.D.") 96-389 (12/26/96), in which transferable bulk supplies, including automotive adhesives and sealants, were accorded the resale exemption.
DETERMINATION
The application of the tax to repair businesses generally is set out in Title 23 of the Virginia Administrative Code ("VAC") 10210-3050. In addressing a repairman's sales of tangible personal property, the regulation indicates that [i]f the dealer performing the repair work does not separately state, itemize or segregate at a fixed or retail price, the parts, materials and supplies sold, the tax will apply to the total charge including repair labor."
When addressing purchases made by repair businesses, the regulation provides that "[r]eplacement parts, materials and supplies that are transferred to the customer may be purchased under certificates of exemption. The tax must be paid on equipment, tools and all other tangible personal property used in performing the repair work."
With these provisions in mind, the purchase and sale of supplies that are transferred to the customer, especially transferrable bulk supplies, deserve special consideration. One major concern is that customers know what components of the invoice are taxable. A second concern is that items that are purchased by the repairman exempt for resale are properly taxed at the time those items are sold. Accordingly, the application of the tax to purchases of transferrable bulk supplies will depend on how those items are invoiced to customers.
The Taxpayer submits copies of invoices to demonstrate that it collects the sales tax on lump-sum charges for windshield replacements. In addition, the Taxpayer submits copies of invoices demonstrating that it collects sales tax on separately stated charges for windshield installation kits that include the urethane adhesive. Based on this evidence, it is clear that the customer would be aware that the urethane is taxed. Accordingly, the resale exemption may apply to the Taxpayer's purchases of urethane and other adhesives needed for the installation of automotive windshields.
Based on this determination and the fact that the policy set out in P.D. 96-389 on transferrable bulk supplies predates the Taxpayer's period of audit, I find basis for removing all of the contested transactions from the audit. Accordingly, ***** will be abated in full.
If you have any questions regarding this determination, you may contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
AR/36690R
Rulings of the Tax Commissioner