Tax Type
Retail Sales and Use Tax
Description
Ship repair; mobile offices; and vendor refunds.
Topic
Tangible Personal Property
Date Issued
07-01-2010
July 1, 2010
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 request correction of the sales and use tax assessment issued to the Taxpayer as a result of an audit for the period January 2006 through December 2008.
FACTS
The Taxpayer is a ship repair facility. As a result of the Department's audit, the Taxpayer was assessed use tax on various purchases of tangible personal property used or consumed in its business. The Taxpayer takes exception to a number of purchases held in the audit. The Taxpayer also requests assistance in securing sales tax refunds for property used directly in ship repair and sales tax charged on mobile offices not subject to the sales tax.
DETERMINATION
Contested Audit
It is my understanding that the auditor has met with the Taxpayer's representatives concerning all of the contested purchases, and the Taxpayer is in agreement with the proposed adjustments that are to be made to the audit assessment. In general, such adjustments are as follows:
- Based on Purchases 1 of your Schedule 1, fuel oil, safety apparel and the occasional sale were removed from the audit. A 50% adjustment was applied to food purchases.
Based on Purchases 2 of your Schedule 1, the contested rags were not adjusted because the original report applied a 50% prorated tax.
Based on your Schedule 2, a one-time credit for self-assessed taxes was applied to assets used directly in ship repair activities, and accrual credits were applied to the sample period and projected accordingly.
Refund Request
When a consumer is seeking a refund of sales tax collected by a dealer, it has been the Department's long-standing policy1 that a consumer should first apply for a refund directly from the dealer that sold the item to the consumer. In that way, the dealer can provide a full tax refund, and avoid the issue of a dealer's discount, if the refund claim is valid and timely filed with the dealer. Only if the dealer refuses to issue such refund should the consumer apply directly to the Department for a refund. If a dealer has refused to issue the refund, then the consumer must identify the dealer and explain why the claim for refund could not, or would not, be made by the dealer. In the event the Department issues a refund directly to the consumer, Title 23 of Virginia Administrative Code VAC 10-210-3040 specifically limits the refund to the net amount (less any dealer's discount) of the sales tax remitted to the state on the transaction generating the refund.
In this case, I understand that the Taxpayer has not requested any refunds from its vendors in regard to the refund transactions in question. Accordingly, the Taxpayer should comply with the Department's policy on sales tax refunds. If it is unable to obtain such refunds from the vendors, it may seek refunds from the Department in accordance with Title 23 VAC 10-20-180 A 2 b.
In requesting refunds from vendors, the Taxpayer must provide written certification to the vendor that it made no taxable use of the tangible personal property purchased from the vendor. The Taxpayer must also briefly describe the exempt usage and cite the appropriate statutory exemption, regulation or ruling. In addition, it may present a copy of this letter to those vendors or lessors from which the refund is sought. Furthermore, mobile office lessors may be provided with a copy of Public Document (P.D.) 97-482 (12/12/97), in which the Tax Commissioner determined that the sale, lease or rental of mobile offices as defined in Va. Code § 58.1-2401 are not subject to the retail sales and use tax. For tangible personal property used directly in the repair of ships or vessels used exclusively or principally in interstate or foreign commerce, vendors may be provided with a copy of Va. Code § 58.1-609.3 4, as well as P.D. 87-45 (2/26/87) or other public document that more appropriately addresses the specific issue for the Taxpayer.
CONCLUSION
The contested assessment will be revised in accordance with this determination. Because the assessment is paid in full, a refund will be issued for the overpaid tax and interest pursuant to Va. Code § 58.1-1822. The refund will include interest owed on the refunded amount in accordance with Va. Code § 58.1-1833.
The Code of Virginia sections, regulations and public documents 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 determination, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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- Linda Foster
Deputy Tax Commissioner
- Linda Foster
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AR/1-4198411293.R
1. See Title 23 VAC 10-20-180 A 2 b of the General Provisions. Such provision was formerly incorporated into Title 23 VAC 10-20-160 (C) (3). t
Rulings of the Tax Commissioner