Tax Type
Retail Sales and Use Tax
Description
Lumber manufacturing; Truck scale for incoming materials
Topic
Taxability of Persons and Transactions
Date Issued
02-26-1987
February 26, 1987
Re: §58.1-1821 Application/Sales and Use Tax
Dear ***********************
This will reply to your letter of September 15, 1986, in which You submit an application for correction of sales and use tax assessed to **************** as the result of a recent audit.
FACTS
**************** (Taxpayer) is engaged in the processing of lumber for sale or resale and is as such entitled the industrial manufacturing exemptions set forth in §58.1-608.1 of the Code of Virginia. A recent audit of the taxpayer produced an assessment for various items used in its operations, including a truck scale used to weigh incoming raw materials and the components of pollution control facilities which have recently been certified by the State Water Control Board. Additionally, various equipment supports used in conjunction with exempt production machinery were included in the audit.
DETERMINATION
After reviewing the department's audit, I find the truck scale in question and repair parts for such scale to be used directly in exemption processing activities and exempt under §58.1-608.1 of the Code of Virginia, provided that the scale is used on the taxpayer's processing plant site. The scale in question serves as the first step in the handling and storage of raw materials and as such can be directly analogized to a truck scale found by the Virginia Supreme Court to be used in an exempt manner in Commonwealth v . Wellmore Coal, 228 Va. 149, 320 S.E.2d 509 (1984).
In addition, the pollution control facilities in question are nontaxable pursuant to §58.1-608.52 of the Code of Virginia as they have been certified by the State Water Control Board. The October 2, 1986 letter of ************* with respect to a refund of tax paid by the contractor for the pollution control facilities will be treated as a refund request from the contractor. However, I feel it more appropriate to issue such a refund to the contractor, rather than to honor the contractor's request to assign the refund to the taxpayer.
As to the equipment supports in question, I am unable to determine whether the supports are integral parts of exempt production equipment or whether they are used indirectly in production. Thus, I would ask you to furnish the department's Technical Services Section (at P. O. Box 6-L, Richmond, Virginia 23282) with a more complete description of the supports, including a description of the manner in which the supports are attached to exempt machinery and/or the floor or the production plant. Such information should allow the department to make a prompt determination on this question.
Lastly, I find basis for the waiver of penalty due to your corporation's excellent overall compliance record on purchases and the steps taken by your corporation to improve its use tax compliance. Nonetheless, significantly improved use tax compliance will be expected in future audits in order to avoid the assessment of penalty.
Upon the provision of additional information on the equipment supports and the determination as to their status, the department will revise its audit to delete the truck scale. repair parts for the truck scale, pollution control facilities, and penalty.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner