Tax Type
Retail Sales and Use Tax
Description
Application of tax on donated flower bulbs
Topic
Exemptions
Taxable Transactions
Date Issued
05-19-2008
May 19, 2008
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the "Taxpayer") requesting a ruling on the application of the retail sales and use tax to flower bulbs that the Taxpayer donates to charitable organizations.
FACTS
The Taxpayer is in the business of selling flower bulbs. When the bulbs are no longer viable enough to be sold, the Taxpayer donates the bulbs to charitable organizations. The Taxpayer was audited by the Department and held taxable on the donated bulbs. The Taxpayer questions the tax and requests a ruling regarding the application of tax on the donated bulbs. The Taxpayer also questions the difference between the application of tax to catalogs it distributes and the donated bulbs.
RULING
Flower Bulbs
Title 23 Virginia Administrative Code (VAC) 10-210-490 states, "Any person who withdraws any item of tangible personal property for his own use from an inventory on which no tax has been paid must report tax on the cost of all property withdrawn for purposes other than sale. For example, a retailer who purchases an inventory of clothing exempt from the tax for the purposes of resale, and who withdraws an item from such inventory for personal use, gift or donation, must report tax on the cost price of such item unless such gift or donation is otherwise exempt. Similarly, an item withdrawn from inventory for a promotional give-away or other free distribution, is subject to the tax at the time of withdrawal."
Virginia Code § 58.1-602 defines "use," in pertinent part, as "the exercise of any right or power over tangible personal property incident to the ownership thereof, except that it does not include the sale at retail of that property in the regular course of business."
In this instance, the Taxpayer withdraws property from its inventory for purposes other than resale. Pursuant to Title 23 VAC 10-210-490 and Va. Code § 58.1-602, the Taxpayer is liable for the use tax when it withdraws bulbs from its inventory and donates the bulbs to charitable organizations. The withdrawal of inventory represents a use of the property by the Taxpayer for which it is required to remit the use tax to the Commonwealth.
Catalogs
Pursuant to Va. Code § 58.1-609.6 4, catalogs that are stored for 12 months or less in Virginia and are distributed for use outside of Virginia are exempt from the sales tax. This exemption from the retail sales and use tax is very specific and applies to catalogs only. It does not apply to the distribution of any other tangible personal property.
Based on the exemption in Va. Code § 58.1-609.4, the Taxpayer would be liable for the tax on any catalogs distributed within Virginia. If a portion of the Taxpayer's catalogs is distributed outside of Virginia and a portion is distributed within Virginia, the Taxpayer would be liable for the tax on the portion that is distributed within Virginia. In this instance, you indicate that five percent of the Taxpayer's catalogs are distributed to Virginia residents. Accordingly, five percent of the catalogs would be subject to the tax.
The application of the retail sales and use tax to the donated bulbs and the application of tax to catalogs are governed by separate and distinct sections of the retail sales and use tax law. Accordingly, the manner in which the tax applies to the catalogs has no bearing on application of the tax to the donated bulbs.
This response is based on the facts provided as summarized above. Any change in facts or the introduction of new facts may lead to a different result.
The Code of Virginia sections and regulation cited 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 response, you may contact ***** in the Department's Office of Tax Policy, 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/1-1805960918P
Rulings of the Tax Commissioner