Document Number
09-55
Tax Type
Retail Sales and Use Tax
Description
Market development fees paid in the purchase of tangible personal property
Topic
Property Subject to Tax
Tangible Personal Property
Date Issued
05-01-2009


May 1, 2009



Re: Ruling Request: Retail Sales and Use Tax

Dear *****:

This is in response to your letter requesting a ruling on the application of the Retail Sales and Use Tax to "market development fees" paid by ***** a division of ***** (the "Taxpayer"), in connection with the purchase of tangible personal property.

FACTS


The Taxpayer is a roof deck contractor that obtains work by bidding on public projects. The Taxpayer buys materials from specific vendors requested by the project architect or engineer. One such vendor has hired an independent representative to promote its product to architects and engineers. The vendor charges the Taxpayer a "market development fee" as a separate line item on each invoice for materials purchased. Currently, the vendor is collecting Retail Sales and Use Tax on this fee from the Taxpayer.

The Taxpayer requests a ruling regarding the application of the Retail Sales and Use Tax on this "market development fee."

RULING


Va. Code § 58.1-60a imposes a retail sales tax on the "gross sales price of each item or article of tangible personal property when sold at retail or distributed in this Commonwealth." "Sales price" is defined in Va. Code § 58.1-602 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.

Although "[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made" are exempt from the Retail Sales and Use Tax under Va. Code § 58.1-609.5(1), this exemption would only apply to the services provided to the vendor by the independent representative. Any pass-through charges for the service to the Taxpayer, even if separately stated, would be considered part of the sales price for which the tangible personal property was sold, and would be subject to the Retail Sales and Use Tax. As stated in the "Services" regulation, 23 Virginia Administrative Code 10-210-4040, any service included in or in connection with the sale of tangible personal property is considered taxable. Accordingly, the vendor is required to collect and remit the Retail Sales and Use Tax on "market development fees."

The Va. Code section cited, along with other reference documents, are available on-line in the Tax Policy Library section of TAX's web site, located at www.policylibrary.tax.virginia.gov. If you have any questions about this determination, you may contact ***** in the Office of Tax Policy, Policy Development Division, at *****.
                • Sincerely,

                • Janie E. Bowen
                  Tax Commissioner



PDO/1-2965879716




Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46