Tax Type
Retail Sales and Use Tax
Description
Jewelry and watch repair
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
01-03-1986
January 3, 1986
Re: Ruling Request/Sales and Use Tax
Dear *****************
This will reply to your letter of October 14, 1985, requesting a ruling on the correct application of the retail sales and use tax to a variety of transactions. Rather than provide an item by item response to your extensive specific questions, we have consolidated our response under the three general headings suggested in your letter of Jewelry, Watch and Clock repairs, and one final heading of Miscellaneous to clear up a few other areas which do not fit neatly under any one of the first three headings.
Jewelry Repairs
To summarize, you have requested information on the correct application of the tax to the repair and replacement of jewelry and component parts of jewelry, where either small amounts of materials are used in performing such repairs, or where essential or major component parts are used. Furthermore, you ask whether the tax would apply to alterations to new items of jewelry, prior to sale and to the repair or replacement of damaged or missing stones, parts or other essential materials, under warranty, where there is no charge made to the customer for such repair or replacement.
§630-10-99 of the Virginia Sales and Use Tax Regulations provides that "the tax does not apply to charges for repairs made by shoe, leather, jewelry and like repairmen." (Emphasis added) However, the section continues, "when repairmen go beyond performing repairs and regularly engage in selling tangible personal property, they must register as dealers and collect and pay the tax on retail sales."
Therefore, in the majority of instances, when a repairman provides jewelry repair services, and in connection with such services, provides repair and replacement parts or other materials, he will not be required to collect and remit sales tax on such parts or materials which are thereby conveyed to customers. However, such a repairman would be liable for the tax to the extent of the cost price of all his purchases of such materials from suppliers. Furthermore, when a repairman goes beyond performing jewelry repairs and actually sells such parts and materials apart from the provision of repair services, he will be required to register as a dealer and collect and report the tax on such retail sales.
A jewelry repairman would not be required to collect and remit sales tax on repair or replacement parts used to alter, add to, or repair new jewelry prior to sale to customers, since the ultimate sale of such new jewelry would be subject to the tax. In addition, a jewelry repairman may purchase such repair or replacement parts for use on new jewelry exempt of the tax pursuant to resale exemption.
Lastly, §630-10-l of the Regulations governs returns of items under warranty, originally purchased subject to the tax. This section provides that, "whenever any taxable article is returned to the dealer for adjustment, replacement or exchange and the consumer is given a new article free or at a reduced price under warranty..., the sale or use tax must be computed on the additional amount, if any, paid to the dealer for the new article." (Emphasis added.) Therefore, based on the question propounded in your letter, the tax would not apply to the free replacement by a jeweler of a part or stone in an item of jewelry originally purchased subject to the tax.
Watch Repairs
To summarize, you have requested information on the correct application of the tax to the repair or replacement of watches and component parts of watches, where either small amounts of materials are used in performing such repairs, or where essential or major component parts are used. Furthermore, you ask whether the tax would apply to various transactions involving the sale or exchange of power cells in watches.
In general, a watch repairman will be treated the same as a jewelry repairman regarding repair parts or materials used in providing watch repair services. That is, he will not be required to register and collect and report the tax on such repair parts or materials so used, unless he goes beyond the provision of repair services and actually sells such parts and materials to customers apart from the provision of repair services. However, as above with regard to jewelry repairs, a watch repairman would be liable for the tax to the extent of the cost price of all his purchases of repair parts and material from suppliers. In addition, when a watch repairman provides power cell replacements as a part of his provision of watch repair services, and where he has paid the tax on his purchases of such power cells from suppliers, he will not be liable for the collection and reporting of the tax when they are ultimately conveyed to his customers. However, if such watch repairman sells such power cells independently of the provision of watch repair services, he must register as a dealer and collect and report the tax on such retail sales.
Clocks
In general, the principles stated above with regard to jewelry and watch repairmen apply equally to clock repairs.
Miscellaneous
To summarize, you have requested information on the correct application of the sales and use tax to certain scrap metal transactions and to engraving services both at the point of sale of new items, or of used items, whether or not performed at the time of sale of such used items.
§58.1-608(1)(a) of the Virginia Code provides on exemption from the sales and use tax for "industrial materials for future processing...into articles of tangible personal property for resale." Therefore, sales to persons engaged in the industrial processing of scrap metals for resale, are exempt, when accompanied by a proper exemption certificate. However, the sale by such a scrap metal processor of such usable materials would be subject to the tax, unless made pursuant to other valid exemption.
With regard to charges for engraving services performed in connection with sales of new or used products, such charges, if added to the retail sales price of an item being sold would be subject to the tax. However, when such services are not performed in connection with the sale of tangible personal property, they would be considered to be non-taxable services. Furthermore, all property used or consumed by an engraver in providing such services would be subject to the tax at the time of purchase by the engraver.
I hope that all of the above has responded to your questions, sufficiently, but please let me know if I can be of further assistance.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner