Tax Type
Retail Sales and Use Tax
Description
Items held for resale to foreign customers
Topic
Exemptions
Date Issued
01-04-1988
January 4, 1988
Re: Request for Ruling/Sales and Use Tax
Dear*************
This will reply to your letter of November 11, 1987, in which you wish to determine the application of the sales and use tax to goods held for resale to foreign customers.
FACTS
******** (Taxpayer) is engaged in the sale of parts and machinery to foreign customers. Customarily, articles purchased by the taxpayer for resale are shipped by vendors to the taxpayer's parent corporation in Virginia. The articles received by the parent corporation will either (1) be held for subsequent export, (2) inspected for quality and repacked for subsequent export, or (3) incorporated into machinery for subsequent sale and export.
RULING
Under the facts cited in the taxpayer's letter, it may use a resale certificate of exemption to purchase articles that will subsequently be resold to foreign customers. The subsequent resale of the articles to foreign customers will also be exempt from the sales tax, provided that title to or possession of the articles do not pass to the foreign customers within Virginia (see §58.1-608.20 of the Code of Virginia and Virginia Regulation 630-10-51).
It should be noted, however, that §58.1-623.C of the Code of Virginia imposes the tax upon any dealer who makes any use of tangible personal property purchased under an exemption certificate "other than an exempt use or retention, demonstration, or display while holding property for resale." In this case, the taxpayer and its parent corporation will not be deemed to make a taxable use of articles purchased for resale when the articles are merely (1) held as is for subsequent export, (2) inspected for quality and immediately repacked and held for subsequent export, or (3) incorporated into machinery produced for resale and export.
I trust that this will fully answer your questions; however, if further questions arise, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner