Tax Type
Retail Sales and Use Tax
Description
Assessment adjusted to remove the tax assessed on the cancelled contract/delivery charges
Topic
Exemptions
Subtractions and Exclusions
Taxable Transactions
Date Issued
06-18-2008
June 18, 2008
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 retail sales and use tax assessment issued to ***** (the "Taxpayer") for the period October 2003 through September 2006. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer operates as a manufacturer of log homes. The Taxpayer and its customers enter into contracts for the purchase, ordering and delivery of log homes to the customers' designated site. As a result of the Department's audit, the Taxpayer was assessed tax on an unremitted sale and on the charges resulting from a Change In Delivery Date addendum to the original contract. The Taxpayer provides evidence that the unremitted sale was a cancelled contract and should therefore be removed from the assessment. With regard to the Change In Delivery Date addendum, the Taxpayer maintains that the charges are transportation charges and separately stated for each log home.
DETERMINATION
Unremitted Sale
Based on a review of the contract cancellation letter, contract number 0603147 will be removed from the assessment.
Change In Delivery Date Charges
If a customer wants to change the delivery date of their log home, the Taxpayer creates a Change In Delivery Date Addendum to the original contract. The addendum lists a delivery date change charge schedule that is based on the number of days prior to the original delivery date the customer requests the change. The charges are to compensate the Taxpayer for the additional administrative time and effort involved in rescheduling the delivery of a log home.
The Taxpayer maintains that the additional charges for the change in delivery date are transportation charges and are exempt pursuant to Va. Code § 58.1-609.5 3. Title 23 of the Virginia Administrative Code (VAC) 10-210-6000 B defines transportation and delivery charges as "charges for delivery from the seller to the purchaser, commonly known as 'transportation-out.'"
Title 23 VAC 10-210-4000 defines sales price as "the total amount for which tangible personal property or taxable services are sold and includes any services in connection with such sale." The only amounts excluded from the term "sales price" are those specifically stated in Virginia Code § 58.1-602. Based on the Taxpayer's description of the charges in its appeal letter, I cannot agree that the charges at issue represent transportation or delivery charges. The change in delivery date charge is an addendum to the original contract for purchase of the log home. The charge is not for transportation, but rather compensation for additional administrative time and effort. Therefore, the change in delivery date charge is considered part of the sale price of the log home. There is no deduction from "sales price" for change in delivery date charges. Therefore, the tax was properly assessed on the change in delivery date charges.
CONCLUSION
Based on the above determination, the assessment will be adjusted to remove the tax assessed on the cancelled contract. An updated bill with interest accrued to date will be sent to the Taxpayer. No additional interest will accrue provided the bill is paid within 30 days of the date on the bill.
The Code of Virginia and regulation 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 about this determination, you may contact the 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/1-1538794759.i
Rulings of the Tax Commissioner