Tax Type
Retail Sales and Use Tax
Description
Motor scooters sold to Virginia residents without collecting the retail sales tax
Topic
Collection of Tax
Residency
Date Issued
09-17-2004
September 17, 2004
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in reply to your letter in which you seek correction of the retail sales and use tax audit assessment issued to ***** (the "Taxpayer") for the period August 1999 through July 2002. I apologize for the delay in the Department's response.
FACTS
The Taxpayer makes retail sales of motorcycles, mopeds, trailers and all-terrain vehicles (ATV's). During the audit period, customers residing outside Virginia purchased ATV's and a dirt bike from the Taxpayer. The customers took possession of these items in Virginia. The Taxpayer did not collect the Virginia tax on these sales, believing that the tax did not apply because the vehicles were required to be titled in each of the customers' respective home states. The titling required payment of that state's titling tax on such vehicles. In addition, the Taxpayer sold motor scooters to Virginia residents without collecting the retail sales tax. The Taxpayer contends that regulations issued by Virginia's Department of Motor Vehicles (DMV) require the titling and registration of these vehicles in the same manner as motorcycles.
The auditor assessed the Virginia sales tax on the retail sales price of the ATV's and dirt bike sold to customers residing outside Virginia and on the motor scooters sold to Virginia residents. The Taxpayer contends that the Department's assessment constitutes double taxation on these transactions. Accordingly, the Taxpayer seeks a revision of the Department's audit assessment.
DETERMINATION
Generally
Virginia Code § 58.1-603 imposes the retail sales tax on "the gross sales price of each item or article of tangible personal property when sold at retail" in Virginia. Virginia Code § 58.1-602 defines a "retail sale" or a "sale at retail" as "a sale to any person for any purpose other than for resale in the form of tangible personal property or services taxable under this chapter . . . ." A "sale" occurs in Virginia when there is any transfer of title or possession, or both, of tangible personal property for a consideration.
In this case, the Taxpayer is clearly making retail sales to its out-of-state and Virginia customers. Title and possession are transferred to the customer in Virginia for a consideration. Therefore, the retail sales tax must be collected on such transactions unless an exemption provided under Virginia law applies.
Exemption for certain motor vehicles
Sales of motor vehicles are not subject to the retail sales and use tax provided they are subject to the motor vehicle sales and use tax administered by the Virginia DMV, and such tax has been paid. See Va. Code § 58.1-609.1(2) and Title 23 of the Virginia Administrative Code 10-210-990. Vehicles that are not subject to the motor vehicle sales and use tax are subject to the retail sales and use tax when sold, leased or rented.
Motor vehicles subject to the motor vehicle sales and use tax include all self-propelled vehicles designed for self-propulsion, and every vehicle drawn or designed to be drawn by a motor vehicle. Devices that are not considered motor vehicles include vehicles used in Virginia but not required to be licensed by the Commonwealth of Virginia. See Va. Code § 58.1-2401.
Sales to customers residing outside Virginia
While another state's law may require the titling of the ATV's, such a requirement does not prohibit the imposition and collection of the Virginia retail sales tax. The titling tax is a separate and distinct tax from the retail sales tax. In this case, the Taxpayer made retail sales to its customers, with title and possession transferring in Virginia. The Taxpayer failed to collect sales tax on those retail sales, despite the fact that Va. Code § 58.1-603 clearly requires the Taxpayer, as a dealer, to collect the tax. The exemption provided under Va. Code § 58.1-609.1(2) for certain motor vehicles does not apply to the sales at issue because the vehicles are not subject to Virginia's motor vehicle sales and use tax.
In response to your claim that the imposition of the Virginia sales tax amounts to double taxation, in this instance, two different taxing authorities have properly claimed the items at issue are taxable to their respective jurisdictions. The taxes imposed are separate and distinct. Virginia has properly applied the tax on the retail sale of the ATV's because title and possession were transferred to the customers while in Virginia.
Sales to Virginia Customers
A representative of the Virginia DMV explained to a member of my staff that motor scooters could require licensure. If a scooter is manufactured for street use, licensure is necessary. In that instance, the motor vehicle sales tax would apply, and the retail sales tax would not apply to the sale.
No evidence has been presented to show that the motor scooters at issue were manufactured for street use and were required to be licensed by DMV. Therefore, I find that the auditor properly assessed the retail sales tax on the sales of the motor scooters. If the Taxpayer can provide evidence to show that certain sales to Virginia customers included motor scooters that were manufactured for use on the streets and were required to be licensed by DMV, I will consider an adjustment of the Department's audit. Such documentation should be made available for the auditor's review within 30 days from the date of this letter. If such information is not made available within the time allowed, the assessment of the retail sales tax on the motor scooters sold to Virginia customers will be considered correct.
The fact that the retail sales tax is due on the motor scooters does not result in double taxation. The Taxpayer's customers who have paid the motor vehicle sales and use tax to DMV on the motor scooters, ATV's or dirt bikes not manufactured for street use have paid the tax in error. The customers may request a refund of the tax paid to DMV by submitting Form SUT 2, copy enclosed. This form is also accessible on the DMV website at www.dmvnow.com.
Conclusion
Based on the foregoing, I find that the Virginia retail sales tax has been properly assessed. As previously stated, however, I will allow the Taxpayer the opportunity to furnish additional information regarding the sale of motor scooters to Virginia customers. The Department's auditor will contact you within the next 30 days to arrange a time to review any additional information.
If the requested information is not available, the Taxpayer should return its payment for the balance of tax and interest totaling ***** to: Virginia Department of Taxation, 3600 West Broad Street, Suite 160, Richmond, Virginia 23230, Attention: *****. Questions concerning payment of the assessment may be directed to ***** at *****.
The Code of Virginia sections and regulations cited, along with other reference documents, are available on-line in the Tax Policy Library section of the Department's web site, located at www.tax.state.va.us. If you should have any questions regarding this determination, please contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****@tax.state.va.us or at *****.
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- Sincerely,
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Kenneth W. Thorson
Tax Commissioner
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AR/43945Q
Rulings of the Tax Commissioner