June 16, 2020
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 April 2015 through March 2018. The assessment at issue has been paid in full. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer provides truck driver training courses to facilitate students in obtaining of a commercial driver’s license. The auditor assessed use tax in the audit on purchases of fixed assets because the Taxpayer did not accrue consumer use tax on the purchases. The Taxpayer contests the assessment of the use tax on the purchase of a tractor and the purchase of mobile office trailers. The Taxpayer requests that these transactions be removed from the audit.
DETERMINATION
Tractor
During the audit period, the Taxpayer purchased a tractor that is used to scrape the lot at its business location. The Taxpayer maintains that the tractor was purchased from a farmer, not a tractor dealer. Accordingly, the Taxpayer maintains that the occasional sale exemption applies to the purchase. With its appeal, the Taxpayer provides an email from the farmer that sold the Taxpayer the tractor. In the email, the farmer states that he is a livestock and hay farmer. The Taxpayer also provides a bill of sale for this transaction that shows the tractor’s purchase price and the date of purchase.
Virginia Code § 58.1-609.10 2 provides that the retail sales and use tax does not apply to “An occasional sale, as defined in § 58.1-602.”
Virginia Code § 58.1-602 defines occasional sale as:
A sale of tangible personal property not held or used by a seller in the course of an activity for which he is required to hold a certificate of registration, including the sale or exchange of all or substantially all the assets of any business and the reorganization or liquidation of any business, provided such sale or exchange is not one of a series of sales and exchanges sufficient in number, scope and character to constitute an activity requiring the holding of a certificate of registration.
Title 23 VAC 10-210-1080 C provides that “Any person who purchases an item in a transaction which is deemed an “occasional sale” shall likewise not be liable for any use tax on such purchase.”
Based on the information presented, I find that the farmer is not regularly engaged in making sales of tractors and would not hold a certificate of registration for the sale of this type of property. As such, the occasional sale exemption applies to the sale of the tractor by the farmer to the Taxpayer. Further, in accordance with Title 23 VAC 10-210-1080 C, the Taxpayer is likewise not liable for the use tax on the purchase of the tractor. Accordingly, this transaction will be removed from the audit.
Mobile Office Trailers
The Taxpayer provides that the mobile office trailers (the “trailers”) at issue were purchased from the seller located in Falls Church, Virginia. The Taxpayer further states that when the trailers were purchased, they were located in Maryland and not the seller’s location in Virginia. The Taxpayer provides that it hired a shipping company to pick up the trailers in Maryland for delivery to locations in Virginia. The Taxpayer contests the assessment of tax on the purchase of the trailers and maintains that the purchase is not a Virginia taxable sale because the seller did not deliver the trailers to the Taxpayer in Virginia. The Taxpayer has not provided invoices related to these transactions, but provides a copy of shipment information for one of the trailers.
Title 23 VAC 10-210-2070 A defines place of business as:
The business location in Virginia that first takes the purchaser's order, whether in person, by purchase order, or by letter or telephone, regardless of the location of the merchandise or the point of acceptance of the order or shipment. "Place of business" includes a store, a sales or other office, or any warehouse.
Title 23 VAC 10-210-2070 B provides that:
Sales by dealers located in Virginia are generally subject to the sales tax and sourced to the city or county of the place of business of the dealer collecting the tax, without regard to the city or county of possible use by the purchaser. The sale of tangible personal property at the place of business of the seller is sourced to that place of business, even if the goods are ultimately delivered to the purchaser at another location.
Based on the information provided by the Taxpayer, the seller is a Virginia dealer, the seller’s place of business is located in Virginia, and the transaction at issue took place in Virginia. In accordance with the regulation, and in light of these factors, the situs of sale is in Virginia and the Virginia sales tax applies to the sales. The application of the sales tax is based upon the location of the seller’s place of business and not the location of the trailers at the time the transaction occurred.
Virginia Code § 58.1-604 imposes “a tax upon the use or consumption of tangible personal property in this Commonwealth, or the storage of such property outside the Commonwealth for use or consumption in this Commonwealth.” Title 23 VAC 10-210-6030 A provides that “The use tax applies to the use, consumption or storage of tangible personal property in Virginia when the Virginia sales or use tax is not paid at the time the property is purchased.”
Virginia Code § 58.1-602 defines use as “the exercise of any right or power over tangible personal property incident to the ownership thereof, except that it does not include the sale at retail of that property in the regular course of business.”
The trailers at issue were picked up from Maryland by a shipping company hired by the Taxpayer. The trailers were delivered to a community college in Virginia where driver training is offered and the trailer is used for storage. The other trailers were delivered to locations owned by the Taxpayer. By picking up the trailers in Maryland (via a hired shipping company) and having the trailers delivered to locations in Virginia, the Taxpayer exercised a use over the trailers incident to its ownership. Because the sales tax was not charged and collected by the seller on the sale of the trailers, the Taxpayer became subject to the use tax on its purchase of the trailers. As such, the Taxpayer was required to remit the use tax to the Commonwealth. Accordingly, I find that the Taxpayer is liable for the use tax assessed in the audit, and the transactions at issue will not be removed from the audit.
Based upon the information provided, and in accordance with Virginia Code §§ 58.1-609.1 2, 58.1-2401 and 58.1-2402, it appears possible that the trailers are subject to the motor vehicle sales and use tax, rather than the retail sales and use tax. The Virginia Department of Motor Vehicles (“DMV”) can assist the Taxpayer in making that determination. If it is determined that the motor vehicles sales and use tax applies, I will remove these transactions from the audit, if the Taxpayer provides the appropriate payment documentation from DMV within 45 days from the date of this determination letter.
CONCLUSION
The audit will be returned to the appropriate field audit staff to make the adjustments in accordance with the determination regarding the occasional exemption. Once the adjustment is complete, the Taxpayer will receive a refund with interest. If the Taxpayer provides documentation from DMV in the allotted timeframe demonstrating that the motor vehicle sales tax applies to the trailers and payment has been made, the audit will be adjusted and the Taxpayer will receive a refund with interest. If such documentation is not provided, the transactions regarding the trailers will remain in the audit, and no refund will be issued.
The Code of Virginia sections and regulations cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions 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 *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1902P