Tax Type
Retail Sales and Use Tax
Description
The low rate program fees listed on the invoices are interest charges
Topic
Computation of Tax
Interest Payments
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 2000 through September 2006. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer provides underground and overhead utility services for the utility industry. During the audit period, the Taxpayer purchased construction equipment from a vendor. The Taxpayer financed the construction equipment for a period of 36 months. The vendor's invoice lists a low rate program fee on each invoice. As a result of the Department's audit, the auditor concluded that the fee is a handling charge and assessed the tax.
The Taxpayer contends that the low rate program fees listed on the invoices are interest charges. The Taxpayer has provided additional documentation in the form of finance contracts to support its contention that the interest charges are not subject to retail sales and use tax.
DETERMINATION
Virginia Code § 58.1-602 excludes from the definition of "sales price" the following charges: "finance charges, carrying, service charges or interest from credit extended on sales of tangible personal property under conditional sales contracts or other conditional contracts providing for deferred payments on the purchase price."
Based on a review of the invoices and finance contracts, the charges listed as low rate program fees represent interest charges in connection with the financing of the construction equipment. Accordingly, low rate program fees will be removed from the audit.
The audit will be revised as determined above. Based on the Department's records, the non-contested portion of the assessment has been paid in full. Therefore, after removal of the interest charges, this audit assessment will be paid in full.
The Code of Virginia section 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 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
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AR/1-1654148845.i
Rulings of the Tax Commissioner