April 2, 2025
RE: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ***** :
This is in response to your letter submitted on behalf of *****, Inc. (the “Taxpayer”) in which you request a reconsideration of the determination dated March 27, 2024, issued as Public Document (P.D.) 24-36.
FACTS
An audit was conducted on the books and records of the Taxpayer, a custom home builder, for the period February 2016 through February 2022 resulting in an assessment of use tax on certain purchases. The Taxpayer filed an application for correction of the assessment contending that purchases of sand because it was real property, not tangible personal property, and, therefore, not subject to the tax. In P.D. 24-36, the Department upheld the assessment. The Taxpayer requests a reconsideration of the determination contending that sand must first be personal property to meet the definition of tangible personal property.
ANALYSIS
The Taxpayer argues that P.D. 24-36 did not adequately address whether Virginia Code § 58.1-602 requires tangible personal property to first be personal property before it can be subject to Virginia’s retail sales and use tax. While the Taxpayer has failed to cite any legal theory or precedent to support such a claim, Virginia courts have defined “personal property” to include “[a]ny movable or intangible thing that is subject to ownership and not classified as real property.” See Henry v. Commonwealth, 753 S. E.2d 863, 874 (Va. Ct. App. 2014). As defined by the court, property is personal if it is owned by a person or entity.
According to the Taxpayer, the unprocessed sand was part of the land in its original location. This land was either owned by an entity in the business of digging up sand and dirt or such entity had permission to remove the earth from the land. In either case, once the sand at issue was removed from the land, the business exercised its ownership by selling the sand and delivering it to the location as directed by the Taxpayer. Based on these facts, the sand met the definition of personal property as defined by the court in Henry.
DETERMINATION
Having established that the sand, once it became movable, was personal property, the Department has satisfied the Taxpayer’s assertions. Further, in P.D. 24-36, the Department has already determined that the sand was tangible personal property as defined under Virginia Code § 58.1-602.
Virginia Code § 58.1-205 deems any tax assessment issued by the Department as prima facie correct. This means that the burden of proof is upon the Taxpayer to prove that the assessment is incorrect. The Taxpayer has cited no Virginia law to support its claim that the sand at issue was not tangible personal property once severed from real estate.
Accordingly, the tax liability assessed in the audit is upheld. The assessment at issue has been paid in full and no further action is required by the Taxpayer.
The Code of Virginia sections cited are available online at law.lis.virginia.gov. The public document cited is available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If there are any questions regarding this determination, please contact ***** in the Department’s Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at *****, or via email at *****.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR/4930.F