Tax Type
Retail Sales and Use Tax
Description
Items Temporarily Stored In State
Topic
Taxability of Persons and Transactions
Date Issued
11-19-1986
November 19, 1986
Re: Request for Ruling/Sales and Use Tax
Dear ***********************
This will reply to your letter of October 14. 1986, in which you request a ruling on the application of the sales and use tax to tangible personal property temporarily stored in Virginia for ultimate shipment outside the state.
You note that your corporation is constructing a hotel in the state of Maryland; however, a portion of the furnishings for the hotel are being stored temporarily in a warehouse located in Virginia. Warehouse personnel will sign for and accept the merchandise on behalf of your corporation,. however, the furnishings will not be unpackaged until delivered into Maryland (in the warehouse operator's vehicles) for use in the hotel.
§58.1-603 of the Code of Virginia levies the sales tax not only upon the sale at retail or lease of tangible personal property. but also upon "each item or article of tangible personal property stored in this State for use or consumption in this State." The term "use" is defined in §58.1-602.20 as "the exercise of any right or power over tangible personal property incident to the ownership thereof." In this case, the Virginia tax will apply inasmuch as the property is stored within Virginia and your corporation exercises first use of the property in the state.
Even though your corporation never physically takes possession of the property, it does exercise rights inherent in the ownership of the property, such as directing the warehouse operator to deliver the furnishings out-of-state. A similar situation was addressed by the Virginia Supreme Court in WTAR Radio-TV v. Commonwealth, 217 Va. 877, 234 S.E.2d 245 (1977), which found the airing of an advertisement over the television airwaves to be "tantamount to delivery" of the property to the purchaser even though the purchaser never took actual physical possession of the property. Furthermore, the fact that the property will ultimately be delivered outside Virginia is of no bearing as the Virginia Supreme Court, in Commonwealth v. Miller-Morton, 220 Va. 852, 263 S.E.2d 413 (1980), held that "[i]f a taxable event occurs in Virginia, subsequent delivery of the property outside this State does not immunize the taxable event." In this case, as your corporation exercises rights incident to the ownership of the property while it is in storage in Virginia, the Virginia tax therefore applies.
I trust that this will answer the question posed in your letter, but please feel free to contact the department if any further questions or concerns arise.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner