82-12 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Leases, cold storage warehouses

Topic

Accounting Periods and Methods

Appropriateness of Audit Methodology

Basis of Tax

Date Issued

02-01-1982

February 1, 1982

Re: § 58-1118 Application: Sales Tax

Dear *****************

Reference is made to the April 28, 1981 application for correction of an assessment of sales tax filed on behalf of your client, ********************and the hearing held in Richmond on November 24, 1981. The assessment is the result of an audit for the period March 1, 1978 through November 30, 1980.

Facts

*********** is engaged in operating cold storage warehouses and in connection with this activity, leases wooden bins to apple farmers. Farmers harvest the apples into baskets or other containers which are then dumped into the wooden bins and subsequently transported to ****** and kept in storage prior to subsequent shipping for sale. You contend that the wooden bins are exempt under Virginia Code §58-441.6(c) on the basis that the words "containers for fruits and vegetables" are unmodified and therefore there is no requirement for such containers to be "used in agricultural production for market."

Determination

The language in Virginia Code §58-441.6(c) remained the same from September 1, 1966 (the effective date of the Virginia Retail Sales and Use Tax Act) until 1977. During this period Virginia Code § 58-441.6(c) read as follows:

- Commercial feeds, seed, plants, fertilizers, liming materials, breeding other livestock, semen, breeding fees, baby chicks, turkey poults, agricultural chemicals, fuel for drying or curing crops, baler twine, containers for fruits and vegetables, or farm machinery, and all other agricultural supplies provided the same are sold to and purchased by farmers for use in agricultural production for market.

On October 20, 1966 the department published the enclosed list of items subject to and exempt from tax when purchased by farmers. That list was revised on October 1, 1967, copy enclosed, and was subsequently printed. As you can see, the department's administrative interpretation of Virginia Code §58-441.6(c) with respect to bins used for storage of agricultural products has been that such items are not used in agricultural production as set out in Virginia Code § 58-441.6(c) and are subject to tax.

The first time that Virginia Code §58-441.6(c) was amended occurred during the 1977 General Assembly and there have been several amendments subsequent to 1977; however, these amendments had no application to the area which is at issue in your application for correction. Enclosed for your information is a copy of each bill passed since 1977 amending Virginia Code § 58-441.6(c) along with the department' s comments on each.

On the basis of the above, the application for correction is denied and payment of the audit deficiency should be made.

Sincerely,

W. H. Forst
State Tax Commissioner

Rulings of the Tax Commissioner