Tax Type
Retail Sales and Use Tax
Description
ATV used for farm repairs is taxable
Topic
Exemptions
Property Subject to Tax
Date Issued
08-10-2005
August 10, 2005
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 Department's retail sales and use tax audit assessment issued to ***** (the "Taxpayer") for the period December 2002.
FACTS
The Taxpayer is a farmer raising cattle for market. The Taxpayer purchased an all terrain vehicle (ATV) that is used on the farm for the purpose of maintaining and repairing fencing. The Taxpayer contends that the ATV is tangible personal property used in agricultural production for market and should be exempt of the tax.
DETERMINATION
Virginia Code § 58.1-609.2 1 exempts from the retail sales and use tax "tangible personal property, except for structural construction materials to be affixed to real property owned or leased by a farmer, necessary for use in agricultural production for market and sold to or purchased by a farmer or contractor . . . ."
The term "structural construction materials" is not limited to the literal meaning of the term "structures," but rather encompasses those materials that become a part of real property. See Public Document 98-197 (11/30/98). Tangible personal property that becomes a part of real property at the time of its use and loses its tangible status does not enjoy an exemption from the tax.
Furthermore, Title 23 of the Virginia Administrative Code (VAC) 10-210-50, which interprets Va. Code § 58.1-609.2 1, specifically states that the term "structural construction materials" includes permanent fencing. Because permanent fencing is considered a structural construction material that does not qualify for the agricultural exemption, it is taxable upon its purchase. Likewise, equipment and supplies purchased for use in erecting, repairing and maintaining such fencing do not benefit from the agricultural exemption provided in Va. Code § 58.1-609.2 1. Accordingly, the ATV purchased by the Taxpayer for use in repairing and maintaining permanent fencing is taxable.
The exemption in Va. Code § 58.1-609.2 1 is limited to agricultural production and not the ancillary activities that support such production. See Public Document 98197. In addition, the Virginia courts have consistently required strict construction of sales tax exemptions, i.e., where there is any doubt as to the application of an exemption, the doubt is resolved against the one claiming the exemption. Winchester TV Cable Co. v. State Tax Commissioner, 216 Va. 286, 217 S.E. 2d 885 (1977).
Based on the foregoing, the assessment is correct. An updated bill, with interest accrued to date, will be sent to the Taxpayer. No additional interest will accrue provided the updated bill is paid within 30 days from the date indicated on the bill notice.
The Code of Virginia section, regulation and public document cited are available on-line in the Tax Policy Library section of the Department's web site, located at www.tax.virginia.gov. If you have any questions regarding this determination, please contact ***** of the Department's Office of Policy and Administration, Appeals and Rulings, at *****@tax.virginia.gov or at *****.
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- Sincerely,
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- Kenneth W. Thorson
Tax Commissioner
- Kenneth W. Thorson
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AR/54705Q
Rulings of the Tax Commissioner