Tax Type
Retail Sales and Use Tax
Description
Sales price of tangible personal property listed on the invoices is subject sales tax.
Topic
Collection of Tax
Tangible Personal Property
Date Issued
11-21-2007
November 21, 2007
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter in which you seek correction of the retail sales and use tax assessment issued to ***** (the "Taxpayer") for the period October 1999 through June 2005. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer's dental practice contracts with a vendor to provide teeth whitening services to its patients. The Department's audit disclosed that the Taxpayer failed to remit use tax on numerous purchase invoices. The Taxpayer contends that Virginia retail sales and use tax is not due on the purchases because the tax is included in the lump sum charge by the vendor. The Taxpayer indicates that the vendor collects tax on 40% of the procedure cost and remits the appropriate amount of sales tax to Virginia. The Taxpayer provides an explanation from the vendor of its tax collection procedure to support its position.
DETERMINATION
Title 23 of the Virginia Administrative Code (VAC) 10-210-500 addresses purchases by dentists and states:
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- Dentists are deemed to be providing professional services and charges for their services are not subject to the tax. Similarly, dentists are deemed to be the consumers of all tangible personal property purchased for use in their practice except controlled drugs which may be purchased exempt from the tax.
Virginia Code § 58.1-603 imposes the retail sales tax on the gross sales price of tangible personal property sold. Virginia Code § 58.1-602 defines "sales price" to mean:
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- the total amount for which tangible personal property or services are sold, including any services that are a 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 expense whatsoever.
The invoices reviewed by the Department indicate that the Taxpayer purchased tangible personal property only. The invoices list procedure kits, toothpaste and other tangible personal property associated with the teeth whitening services. Pursuant to Va. Code § 58.1-603, the total sales price of the tangible personal property listed on the invoices is subject to the retail sales tax. Based on Va. Code § 58.1-603, the auditor correctly held the untaxed balance of the invoices taxable.
In addition, I am not persuaded by the explanation offered by the vendor. Virginia Code § 58.1-625 requires that a dealer shall separately state the amount of the tax and add such tax to the sales price or charge. The vendor failed to follow this requirement. Furthermore, Va. Code § 58.1-603 specifically prohibits the vendor from deducting his labor or service costs or any other expenses from the sales price of the tangible personal property sold to the Taxpayer.
Based on the above determination, the assessment is correct. An updated bill with interest accrued to date will be sent to the Taxpayer. No further interest will accrue provided the bill is paid within 30 days of the date on the bill. Please remit payment to: Virginia Department of Taxation, Office of Policy and Administration, Appeals and Rulings, P. O. Box 27203, Richmond, Virginia 23261-7203, Attention: *****.
The Code of Virginia and regulation sections cited, along with other reference documents, are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website. If you have any questions about this determination, you may contact ***** at *****.
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- Sincerely,
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- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
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AR/1-606006507i
Rulings of the Tax Commissioner