Tax Type
Retail Sales and Use Tax
Description
Construction equipment purchases out-of-state
Topic
Property Subject to Tax
Date Issued
04-11-1984
April 11, 1984
Re: Request for Ruling/Sales and Use Tax
Dear ****
This will reply to your letter of March 8, 1984 in which you request a ruling on the applicability of the sales and use tax to certain uses of equipment within Virginia.
FACTS
***** (hereinafter *****) is engaged as a construction contractor operating from its main office within Virginia. In order to perform construction contracts, ***** has purchased various equipment within West Virginia, which exempts contractors from the sales tax on equipment used directly in a contracting business, and has later transported such equipment to its home base in Virginia.
Since the equipment was purchased exclusive of the West Virginia sales tax, the Virginia sales and use tax is applicable upon the equipment's transportation into Virginia. ***** contends though that such tax should prorated based upon the provisions of § 58-441.5(a) of the Code of Virginia inasmuch as******* contemplates using such equipment in out-of-state construction contracts as well as contracts within Virginia.
RULING
§ 58-441.5(a) of the Code of Virginia imposes the use tax upon "the cost price of each item or article of tangible personal property used or consumed in this State," provided that the tax will be based upon the property's current market value if brought within Virginia six months or more after its acquisition in another state. The above statute further states that the use tax "shall be based on such proportion of the cost price or current market value as the duration of time of use within this State bears to the total useful life of such property (but it shall be presumed in all cases that such property will remain within this State for the remainder of its useful life unless convincing evidence is provided to the contrary)."
Based upon the provisions of Virginia Code § 58-441.5(a), you assert that ***** should be entitled to prorate its use tax liability on equipment stored in Virginia based upon its use in Virginia to its total use. We disagree; the department has traditionally interpreted this statute as applying in cases in which property is brought to Virginia for only a short period or a fixed period of time and is then removed from Virginia permanently.
A partial exemption is not applicable in this case inasmuch as you do not know the amount of time that the equipment in question will be used in Virginia and how that amount of time bears to the total useful life of such equipment. The computation of such a percentage is contingent upon the future contracts of *****. At this point in time, it is impossible to predict where future jobs will be located and how long your equipment will be located outside of Virginia during its useful life.
Therefore, based upon the foregoing, I must conclude that ***** may not obtain a refund of a portion of the sales and use tax paid by the corporation on its use of equipment in Virginia.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner