09-162 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Format, graphic printing company; Sale for resale

Topic

Exemptions

Property Subject to Tax

Sale for Resale

Date Issued

10-16-2009

October 16, 2009

Re: § 58.1-1821 Application: Retail Sales and Use Tax

Dear *****:

This is in response to your letter submitted on behalf of ***** (the "Taxpayer"), in which you seek correction of the retail sales and use tax assessment issued for the period February 2002 through January 2008.

FACTS

The Taxpayer is a large format, graphic printing company located in *****. The Taxpayer is contesting the inclusion of certain transactions in the audit for the aforementioned period. The contested transactions will be addressed below based on the Taxpayer's explanation as to why the transactions are not subject to the retail sales and use tax.

DETERMINATION

Line Items 10, 17-18, 31, 33, 38, 42, 43, 47-49

With respect to these line items, the Taxpayer contends that it obtained Virginia sales and use tax certificates of exemption.

Pursuant to Va. Code § 58.1-623 A, "All sales or leases are subject to the tax until the contrary is established. The burden of proving that a sale, distribution, lease, or storage of tangible personal property is not taxable is upon the dealer unless he takes from the taxpayer a certificate to the effect that the property is exempt under this chapter."

Virginia Code 58.1-623 B states, "The certificate mentioned in this section shall relieve the person who takes such certificate from any liability for the payment or collection of the tax, except upon notice from the Tax Commissioner that such certificate is no longer acceptable. Such certificate shall be signed by and bear the name and address of the taxpayer; shall indicate the number of the certificate of registration, if any, issued to the taxpayer; shall indicate the general character of the tangible personal property sold, distributed, leased, or stored, or to be sold distributed, leased, or stored under a blanket exemption certificate; and shall be substantially in such form as the Tax Commissioner may prescribe."

Title 23 of the Virginia Administrative Code 10-210-280 A provides, "a certificate that is incomplete, invalid, infirm or inconsistent on its face is never acceptable, either before or after notice." Section B further clarifies that "[r]easonable care and judgment must be exercised by all concerned to prevent the giving or receiving of false, fraudulent or bad faith exemption certificates. An exemption certificate cannot be used to make a tax free purchase of any item of tangible personal property not covered by the exact wording of the certificate."

In this instance, the Taxpayer has not provided any proof to substantiate its claim that the transactions at issue qualified for an exemption. In order to make sales exempt of the tax, the Taxpayer would have to take valid exemption certificates from its customers at the time of the sale. The Taxpayer is required to retain any exemption certificates that it receives from its customers. To date, the Taxpayer has not provided any exemption certificates that it would have received from its customers. Accordingly, these items were properly included on the audit sales exceptions list.

Line Items 2, 5, 6, 11, 20-29

With respect to these line items, the Taxpayer contends that the charges are for labor only and that the retail sales and use tax does not apply.

Virginia Code § 58.1-609.5 2 provides that the retail sales and use tax shall not apply to "[a]n amount separately charged for labor or services rendered in installing, applying, remodeling or repairing property sold."

Virginia Code § 58.1-602 defines "sales price" as "the total amount for which tangible personal property or services are sold, including any services that are a part of the sale, valued in money, whether paid in money or otherwise, and includes any amount for which credit is given to the purchaser, consumer, or lessee by the dealer, without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any other expenses whatsoever."

Pursuant to Public Document 85-224 (12/13/85), "charges for labor and other services are not taxable in and of themselves, but become taxable when included in the price charged to a customer for a ... tangible product."

Pursuant to the Va. Code § 58.1-602 definition of sales price, a charge for labor would not be subject to the retail sales and use tax, provided the charge for labor is not included in the price charged for a tangible product. In this instance, the Taxpayer has not provided evidence to substantiate its claim that the transactions at issue are for labor only. Accordingly, the transactions at issue were properly included on the audit sales exceptions list.

Line Items 20-29, 35, 58

With respect to these line items, the Taxpayer contends that the items are for resale and that the retail sales and use tax does not apply.

Pursuant to Va. Code § 58.1-623, all sales are subject to the retail sales and use tax, unless a taxpayer takes from its customer a valid exemption certificate. In order for the Taxpayer to make sales for resale to its customer, the Taxpayer must take from its customer a valid resale exemption certificate. The Taxpayer is required to retain a copy of the resale exemption certificate in its records. To date, the Taxpayer has not provided valid copies of its customers' resale exemption certificates that relate to the transactions at issue. Accordingly, the transactions were properly included on the audit sales exceptions list.

Line Item 16

With respect to this line item, the Taxpayer contends that the tax was paid to the applicable state.

The Taxpayer has not provided proof to substantiate its contention that the tax for this transaction was properly paid to another state. Accordingly, the transaction was properly included on the audit sales exceptions list.

Line Item 52

With respect to this item, the Taxpayer contends that the taxable amount listed in the audit is incorrect.

It is my understanding that the taxable amount has already been corrected. The duplicate amount of ***** was removed prior to the audit being closed. Accordingly, no further action is required.

CONCLUSION

Virginia Code § 58.1-205 provides, "[a]ny assessment of a tax by the Department shall be deemed prima facie correct." In this instance, the Taxpayer has not met its burden of proving that the assessment is incorrect. During the performance of the audit, the Taxpayer either did not provide any documentation to support its making sales exempt of the Virginia retail sales and use tax, or it provided documentation that was rendered invalid because it did not meet the standards required by Virginia law. Additionally, the Taxpayer did not provide any evidence with its appeal to support its contention that the assessment was incorrect as issued.

Based upon this determination, the assessment is correct. A revised bill, with interest accrued to date, will be mailed shortly to the Taxpayer. No further interest will accrue provided the outstanding assessment is paid within 30 days from the date of the bill. Please remit your payment to: Virginia Department of Taxation, 3600 West Broad Street, Suite 160, Richmond, Virginia 23230, Attn: *****. If you have any questions concerning payment of the assessment, you may contact ***** at *****.

The Code of Virginia sections, regulation and public document 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 *****.

- - - - Sincerely,

- - - - Janie E. Bowen
        Tax Commissioner

Rulings of the Tax Commissioner