Tax Type
Retail Sales and Use Tax
Description
Home heating oil; Utilities included in rent at mobile home park
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
10-12-1984
October 12, 1984
Re: §58-1118 Application: Sales and Use Tax
Dear *******
This will reply to your letter of March 1, 1984, and additional telephonic information of June 27, 1984, in which you seek relief of sales and use tax assessed against your client, ******** ("Taxpayer"), as the result of a recent audit.
Facts
Taxpayer, a mobile home park operator, underwent a sales and use tax audit for the period February 1, 1978 through November 30, 1983, for which an assessment was issued for taxable fuel purchases on which tax was not paid.
Taxpayer rents mobile homes and houses, with the utilities furnished in most cases, to tenants for a monthly fee. The amount of rent charged is not based dollar-for-dollar on the amount of fuel consumed by a rental unit. Fuel use is, however, one of many factors considered in establishing rental fees. There is no specific identification of fuel on the rental bill.
In September 1981 Taxpayer bought a fuel truck "with the expressed intent of selling fuel oil to residents of the mobile home park, other rental units, and the outside community." During the audit period, most of the fuel oil sales were to tenants in the park. Approximately, 25% of Taxpayer's tenants receive assistance from the Virginia Housing and Urban Development program and a smaller percentage from local fuel assistance programs. The HUD program specifically allows and allocates a certain amount for such items as rent, heating, cooking and electricity, which it pays in one amount to the lessor. Some local fuel assistance programs pay amounts allocated for fuel oil directly to the lessor, some to the tenant. When Taxpayer receives the payment direct, it reduces the amount of rent accordingly.
Determination
§58-441.6(gl) exempts from sales and use tax home heating oil used for domestic consumption, which is defined as oil used "by an individual purchaser for other than business, commercial or industrial purposes." Virginia Retail Sales and Use Tax Regs §1-40.2 specifically excludes from the term "domestic consumption" fuel purchased by lessors of apartments and trailer courts.
The fuel was purchased by the Taxpayer, which is deemed to be the fuel's user in carrying out the rental business. A resale is not deemed to have occurred from Taxpayer's having to allocate fuel for purposes of receiving payment from certain agencies. Tenants in those rental units in which utilities are furnished as part of the rent are not purchasing the fuel.
For that reason, no adjustment to the audit papers is appropriate and the balance or the assessment is due and payable.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner