July 7, 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 November 2013 through October 2016. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer is a contractor specializing in excavating and grading services. The Taxpayer also makes retail sales of sand, stone, mulch, and decorative hardscapes. The auditor assessed use tax on the purchase of off-road diesel fuel used in the performance of the Taxpayer’s excavating and grading services. The Taxpayer contends the retail sales and use tax is included in the sale price of the off-road diesel fuel, and the sales tax had already been paid. The Taxpayer requests abatement of the assessment issued with respect to the purchases of the off-road diesel fuel.
DETERMINATION
Virginia Code § 58.1-2226 4 provides that dyed diesel fuel and other fuel that is not used in a highway vehicle is exempt from the Virginia fuels tax. Pursuant to Virginia Code § 58.1-609.1 1, fuels exempt from the Virginia fuels tax are subject to the retail sales and use tax, unless such taxes are specifically exempted. Any person selling fuel at retail that is not subject to the Virginia fuels tax is considered a dealer for the purpose of the retail sales and use tax. The retail sales and use tax must be paid on these fuels, unless an exemption from the retail sales and use tax applies to the sale.
Virginia Tax Bulletin 10-9 (8/24/2010) provides guidance to taxpayers regarding the proper collection of the sales and use tax on sales of fuel that are not subject to the Virginia fuels tax and states:
The retail sales and use tax on fuel may either be included in the unit measure of fuel using the bracket system set forth in Title 23 of the Virginia Administrative Code 10-210-220 to determine the proper amount of tax to be added to the sales price of each unit, or the tax may be computed at a straight five percent of the sales price and separately stated from the selling price. The bracket system does not relieve the dealer from the liability of paying an amount equal to five percent of his gross taxable sales. If the tax is computed at a straight five percent of the sales price, one-half cent or more is treated as one cent.
In instances where the dealer includes the tax in the unit measure of fuel, the dealer should display a notice at the dispensing pump that the sales tax is included in the unit price of the fuel. See, Public Document 12-188 (11/15/2012).
In accordance with the cited authorities, sales of the off-road fuel at issue are subject to the retail sales and use tax. The dealer making sales of the off-road fuel may include the retail sales tax in the price per gallon, provided the dealer displays on the dispensing pump that the sales tax is included in the price. In this instance, the Taxpayer provides photographs of the dealer’s pump that clearly identifies the pump as “Off Road Diesel”. The photographs further show that all fuel dispensed by this pump includes the sales tax in the price of the fuel. Based upon this information, I find that the Taxpayer could have reasonably understood that the sales tax was included in the sales price for the off-road fuel purchased from the dealer during the audit period. Accordingly, the purchases of fuel assessed in the audit will be abated in full.
The Code of Virginia sections, tax bulletin and public document 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 Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1403.P