Tax Type
Retail Sales and Use Tax
Description
Assessed the retail sales and use tax on untaxed purchases of dyed diesel fuel
Topic
Sale for Resale
Taxable Transactions
Date Issued
03-27-2007
March 30, 2007
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This will reply to your letter and recent phone conversation with a member of the Appeals and Rulings staff in which you request a ruling concerning the application of the retail sales and use tax to purchases of dyed diesel fuel by ***** (the "Taxpayer").
FACTS
The Taxpayer operates a country club. You represent that the Taxpayer purchases dyed diesel fuel for resale to members of the country club for use in operating pleasure watercraft. In a recent audit of the Taxpayer by the Department, the Taxpayer was assessed the retail sales and use tax on untaxed purchases of dyed diesel fuel.
The Taxpayer contends that dyed diesel fuel is exempt from tax under Va. Code § 58.1-2226 and Va. Code § 58.1-609.1. The Taxpayer seeks a ruling from the Department that it is not required to pay the retail sales tax on its purchases of dyed diesel fuel.
RULING
It is my understanding that the Taxpayer purchases dyed diesel fuel for resale to its customers. According to the Department's auditor, this was not disclosed at the time of audit. Therefore, the auditor assessed the Taxpayer the use tax on the purchase of such fuel. Because the dyed diesel fuel is purchased for resale (an exempt transaction), the transaction to be examined is the Taxpayer's sale of the dyed diesel fuel.
Virginia Code § 58.1-609.1 1 exempts from the retail sales and use tax "[f]uels which are subject to the tax imposed by Chapter 22 (§ 58.1-2200 et seq.) of this title." [Emphasis added.] Chapter 22 of Title 58.1 contains the Virginia Fuels Tax Act. The retail sales and use tax exemption for motor fuels was enacted to prevent motor fuels from being taxed under both the retail sales and use tax and the Virginia Fuels Tax.
Virginia Code § 58.1-2226 4 provides an exemption from the Virginia Fuels Tax for dyed diesel fuel, except for dyed diesel fuel used to operate a highway vehicle for a taxable use other than a use allowed under 26 U.S.C. § 4082. Because the dyed diesel fuel sold by the Taxpayer is used in operating pleasure watercraft and is not used to operate highway vehicles, the exemption in Va. Code § 58.1-2226 4 is applicable. Accordingly, the Taxpayer's sale of dyed diesel fuel to members for use in operating pleasure watercraft is not subject to the Virginia Fuels Tax.
Because the dyed diesel fuel sold by the Taxpayer to its members is not subject to the tax imposed by Chapter 22 of Title 58.1 (i.e., the Virginia Fuels Tax), the retail sales and use tax exemption in Va. Code § 58.1-609.1 1 is not applicable. Furthermore, there is no statutory exemption from the retail sales tax for dyed diesel fuel used to propel pleasure watercraft. Therefore, the retail sales and use tax applies to the Taxpayer's sales of dyed diesel fuel to its members for use in operating pleasure watercraft, and the Taxpayer is required to collect and remit to the Department the 5% retail sales tax on such sales.
This ruling is based on the facts presented as summarized above. Any change in facts or the introduction of new facts may lead to a different result. The Taxpayer's request for refund will be addressed in a separate letter.
The Code of Virginia sections cited 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 concerning this ruling, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
Janie E. Bowen
Tax Commissioner
- Sincerely,
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AR/1-292105815T
Rulings of the Tax Commissioner