Tax Type
Retail Sales and Use Tax
Description
Expenses Related to Service Labor;
Topic
Basis of Tax
Taxability of Persons and Transactions
Date Issued
06-14-2001
June 14, 2001
e: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****
This is in response to your letter of January 15, 2001, requesting correction of the use tax assessment issued to ***** (the "Taxpayer") as a result of an audit. Copies of cited sources are enclosed.
FACTS
The Taxpayer provides on-site facility and equipment repairs. An audit for the period October 1997 through July 2000 resulted in the assessment of use tax on untaxed travel, processing and upgrade charges in connection with repair parts sold.
The Taxpayer takes exception to the use tax on travel charges and maintains that these charges are considered an exempt part of the technician's normal local labor expense. You indicate that the Taxpayer does not provide room, board or meals for technicians performing an installation or repair at the job site, nor is the customer billed for these types of costs. You request clarification of the term "travel" used in Public Document ("P.D.") 96-88 (5/14/96).
DETERMINATION
Code of Virginia § 58.1-609.5(1) provides an exemption from the retail sales and use tax for "services rendered by repairmen for which a separate charge is made." Code of Virginia § 58.1-609.5(2) provides an exemption from the retail sales and use tax for "[a]n amount separately charged for labor or services rendered in installing, applying, remodeling or repairing property sold." Code of Virginia § 58.1-609.5(3) provides an exemption from the retail sales and use tax for separately stated transportation charges.
In P.D. 96-88, the Tax Commissioner determined that charges for employee travel and accommodation (e.g., hotel/motel) expenses are not deemed exempt transportation charges, as these expenses do not represent costs for shipping goods to retail customers. Nor are employee travel or accommodation expenses part of exempt installation labor or repair labor, as these expenses are incurred prior to, in preparation of, or after the actual installation or repair labor process. Moreover, employee travel and accommodation expenses do not constitute "services rendered by repairmen" because services are not rendered until after the repairman arrives at the job site and cease when the repairman departs from the job site.
Pursuant to Code of Virginia § 58.1-602, "sales price" is defined as "the total amount for which tangible personal property or services are sold, including any services that are part of the sale, valued in money, whether paid in money or otherwise, and includes any amount for which credit is given to the purchaser, consumer, or lessee by the dealer, without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any other expenses whatsoever." (Emphasis added.)
Although travel and accommodation expenses do not constitute services rendered by repairmen, they do constitute "other expenses" which must be included in the taxable sales price. Thus, the sales and use tax applies to employee travel charges at issue even if no accommodation expenses are incurred and regardless of whether the employee's travel is of a local nature or not.
Accordingly, the assessment is proper as issued. To avoid further interest charges, the outstanding liability of ***** should be paid within 30 days of the date of this letter. Payment may be sent to the attention ***** of at the Department of Taxation, Office of Tax Policy, Post Office Box 1880, Richmond, Virginia 23218-1880.
If you have any questions about this response, please contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
COMMONWEALTH of VIRGINIA
Department of Taxation
Department of Taxation
TO WHOM IT MAY CONCERN
Under the authority of Section 58.1-1 of the Code of Virginia, I hereby delegate to Janie E. Bowen, Assistant Tax Commissioner, the authority to sign for me any and all documents, including, but not limited to, affidavits, warrants, rulings, appeals, offers in compromise and sales tax revocations.
This authority shall not extend to matters or documents related to my service on any statutorily created board or commission, including, but not limited to, the Compensation Board and the Treasury Board.
This authority will continue until revoked. The delegation of authority dated June 3, 1994, is hereby revoked and replaced.
Done at Richmond, Virginia this tenth day of September, 1999.
Danny M. Payne
Tax Commissioner
Rulings of the Tax Commissioner