Tax Type
Retail Sales and Use Tax
Description
Tax is applicable to transactions between Taxpayer and its affiliates
Topic
Appropriateness of Audit Methodology
Taxable Transactions
Date Issued
04-20-2007
April 20, 2407
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ********:
This will reply to your letter in which you contend the facts of the determination letter issued on January 11, 2007, to ***** (the "Taxpayer") are incorrect.
FACTS
In the Department's January 11, 2007, letter it was determined that the retail sales and use tax was applicable to transactions between the Taxpayer and its affiliates in accordance with Va. Code § 58.1-603. The Taxpayer, however, disagrees with the Department's position on the basis that the transactions between the Taxpayer and its affiliates are intracompany transactions between departments of the same company.
DETERMINATION
Based on the Department's records and documentation, the Taxpayer and its affiliates are separate legal entities. The Tax Commissioner has previously ruled that affiliated corporations must be treated as separate entities and leases of tangible personal property between them are not exempt intracompany transfers. See Public Document (P.D.) 85-233 (12/31/85), P.D. 88-215 (7/27/88) and P.D. 94-271 (8/30/94). These P.D.s state that virtually any transaction involving a consideration, including rentals between two affiliated companies, is subject to the sales and use tax.
Virginia Code § 58.1-205 provides that a tax assessment issued by the Department is deemed prima facie correct. The burden is upon the taxpayer to prove otherwise. In this case, the Taxpayer has not provided any documentation to prove that the transactions in question were between departments of the same company. Accordingly, I find that the Department's determination of January 11, 2007 correct as issued.
The Code of Virginia sections and public documents 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 web site. 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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- Janie E. Bowen
Tax Commissioner
- Janie E. Bowen
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AR/1-1215912381i
Rulings of the Tax Commissioner