Tax Type
Retail Sales and Use Tax
Description
Sales price" defined; Interest charges
Topic
Taxability of Persons and Transactions
Date Issued
08-31-1984
August 31, 1984
Re: §58-1118 Application/Use Tax
Dear ****
This responds to your letters of May 31 and August 8, 1984, applying for correction of an erroneous assessment of use tax.
FACTS
The taxpayer was audited for the period August 1, 1980 to December 1, 1983, and a deficiency was found in use tax paid on untaxed purchases from nonregistered Virginia sellers and from out-of-state dealers. The taxpayer contests the amount of use tax assessed on the purchase from a Virginia bank of a repossessed bulldozer because the measure of tax, ***** includes ***** of interest on the loan assumption, of interest in arrears owed by the former owner and an error of ***** due to a miscommunication of the amount of the loan from the bank to the taxpayer. The taxpayer also contests the assessment of penalty on this audit on the basis of unfamiliarity with the use tax requirement.
DETERMINATION
Code of Virginia § 58-441.3(b) defines "sales price," in part, as excluding "finance charges, carrying charges, service charges or interest from credit extended on sales of tangible personal property under conditional sale contracts or other conditional contracts providing for deferred payments of the purchase price...." Accordingly, the interest from credit extended to the taxpayer, ***** will be removed from the measure of tax. The ***** of interest in arrears, however, was part of the sales price and not "interest from credit extended" to the taxpayer. Therefore, it must remain in the measure of tax.
The penalty was mandated by this audit since no use tax was filed on any purchases during this period although the taxpayer had been instructed in the previous audit that use tax was required to be reported. Therefore, the penalty cannot be adjusted.
A revised assessment will be issued by adjusting the taxable measure by the ***** of interest and the error.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner