Tax Type
Corporation Income Tax
Description
Farm taxes/credits
Topic
Credits
Exemptions
Date Issued
12-28-1982
December 28, 1982
Re: Request for Ruling: Capital Not Otherwise Taxed
Dear *****************
This ruling is issued in response to your request made to the ***** District Field auditor. You are interested in the application to your business operations of the capital not otherwise taxed and the sales and use tax.
FACTS
******** operates a grain storage area which is used to store grain owned by the taxpayer and grain owned by others. ****** grinds and produces feed for custom orders, bulk, or retail. The feed production operation includes s adding supplements to the grain, such as soybean meal, minerals, vitamins and molasses. In addition, ***** also retails the supplements to farmers for their own use. ******** also operates a retail outlet for the sale of items not processed by the taxpayer as well as items processed by the taxpayer.
DETERMINATION
From the facts set forth above, it appears that for capital not otherwise taxed purpose, ****** is operating several types of businesses. For the operation which is retail, the gross receipts of goods processed, as well as not processed by the taxpayer, would be subject to any local business retail merchant's license and not capital tax.
The wholesale mercantile operation would not be subject to capital tax. The part of ****** operation which is processing and grinding of grain into teed and adding nutrient supplements would be considered processing for capital tax purposes. The Richmond v; Richmond Dairy Co., 156 Va. 63, 157 S.E. 723 and Printice v. City of Richmond, 197 Va. 724, 90 SE 2d 839, cases set forth the principles applicable in the determination of manufacturing. ***** operations, from the facts at hand, do not allow me to classify the business as a manufacturer, however; the operation appears to be processing the grain into feed. ****** storage facilities operate in a service-type manner. This operation is subject to capital tax and local cross receipts license tax as a service operation. For your information, effective January 1, 1983, the capital not otherwise taxed is repealed and all property subject to capital tax before this date is defined as intangible personal property. The intangible personal property tax rate is 30¢ per $100.00 of actual value and is applied on inventory only.
For sales and use tax purposes, ***** is a retailer for its sales of grain, feed, feed supplements, animal health products, shelled corn, and other items used by farmers. As such, ***** should collect and remit sales tax on these and similar items, as well as on fees charged customers for the storage of grain. A farmer may purchase feed or feed supplements on a tax exempt basis when he furnishes an exemption certificate, Form ST-15, at the time of purchase.
Section 58-441.6(ff) of the Code of Virginia would exempt ****** from use tax on Purchases of:
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- Machinery or tools or repair parts therefor or replacements thereof, fuel, power, energy or supplies, and cereal grains and other feed ingredients, including, but not limited to, drugs, vitamins, minerals, nonprotein nitrogen, and other supplements or additives, used directly in making feed for sale or resale.
Fees charged for grain drying would be exempt from tax as this is basically a service transaction; however, grain drying equipment is not exempt from use tax as such equipment is not used directly in processing feed and related products.
I trust this information will be beneficial to you regarding ******* operations with regard to capital not otherwise taxed and the retail sales and use tax. If you have any further questions, please do not hesitate to call on us.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner