Tax Type
Retail Sales and Use Tax
Description
Vessel is used in foreign commerce/personal or entertainment purposes
Topic
Exemptions
Property Subject to Tax
Date Issued
04-24-2003
April 24, 2003
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter requesting correction of the retail sales and use
tax assessment issued to ***** (the "Taxpayer") as a result of an audit for the period July 1999 through December 2000. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer operates a ship repair business. The Taxpayer contests the sales tax assessed on repairs made to a particular vessel. The Taxpayer maintains that the vessel for which the contested repairs were made is engaged principally in interstate or foreign commerce. Consequently, the Taxpayer claims that these repairs qualify for the exemption under Va. Code § 58.1-609.3(4).
The vessel at issue is a commercial yacht that is chartered to individuals or small groups for cruises in the Mediterranean and the Caribbean. You maintain that this vessel is "strictly chartered to ply the high seas to any destination the customer shall choose, from different ports in the United States to different ports in other countries. When not under a current charter, the yacht is sitting in port waiting for the next charter excluding personal use or entertainment use."
DETERMINATION
Va. Code § 58.1-609.3(4) provides an exemption from the retail sales and use tax for repairs and alterations of "[s]hips or vessels . . . used or to be used exclusively or principally in interstate or foreign commerce."
The vessel must be used principally in interstate or foreign commerce in order for the above exemption to apply to the repairs. The facts presented indicate that the vessel is used in foreign commerce but is also used for personal or entertainment purposes. The principal use of the vessel, however, has not been established. Absent the taking of a completed exemption certificate [i.e., Form ST-19 with box #1 checked] prior to or at the time that the repairs were made, the burden of proving that the tax does not apply falls upon the Taxpayer. See Title 23 of the Virginia Administrative Code 10-210-280(A). The Taxpayer has not met that burden of proof and, therefore, is liable for the assessment as issued.
Notwithstanding the foregoing, I will allow the Taxpayer ninety days from the date of this letter to obtain documentation (i.e., excerpts from the vessel's logbook or similar records showing all landings and dockages and related dates for the year preceding the contested repairs) from the owner or captain of the vessel to establish the principal use of this vessel. If the principal use (i.e., more than 50% of the time) of the vessel can be established to be in interstate or foreign commerce as mandated in the exemption statute, then the contested repairs will be removed from the audit. The auditor will contact you shortly to arrange for the receipt of the requested documentation. If the auditor does not receive the requested documentation within the allotted time, the assessment with interest accrued to date will become immediately due and payable.
The Code of Virginia sections and regulations cited are available online in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.state.va.us. If you have any questions about this determination, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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- Kenneth W. Thorson
Tax Commissioner
- Kenneth W. Thorson
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AR/42416R
Rulings of the Tax Commissioner