Tax Type
Retail Sales and Use Tax
Description
Taxicab paint
Topic
Taxability of Persons and Transactions
Date Issued
04-10-1989
April 10, 1989
Re: §58.1-1821 Application/ Sales and Use Tax
Dear***************
This will reply to your letter of December 9, 1988 seeking correction of assessments recently issued to ***********************(taxpayer).
FACTS
In connection with its business as a taxicab company, the taxpayer was recently audited and held liable for the tax on its untaxed purchases of paint used in maintaining its fleet of taxicabs. You contest the assessment stating that the tax should not apply to such purchases of paint, since the paint is applied in a distinctive color scheme and therefore constitutes an integral "part" of each taxicab, is used directly in the rendition of your taxicab service, and is therefore exempt under Virginia Code §58.1-608(54). The taxpayer also seeks the waiver of penalties and interest assessed on such untaxed paint purchases.
DETERMINATION
Prior to 1987, the exemption in Va. Code §58.1-608(54) was limited to, "parts and tires sold or leased to taxicab operators for use or consumption in the rendition of their services." (Emphasis added) HB 1303 in the 1987 General Assembly would have expanded this exemption to include all tangible personal property used directly in the rendition of a taxicab operator's service. This bill would have significantly expanded the exemption to include such items as tools, motor oil, grease, lubricants, brake fluid, etc., used directly in the rendition of a taxicab operator's service.
However, before this bill was enacted into law it was significantly amended by the General Assembly to apply only to meters and dispatch radios used directly in the rendition of taxicab service. This amendment clearly shows the intent of the General Assembly to limit the scope of the exemption.
Accordingly, Virginia Code §58.1-608(54) currently exempts from the sales and use tax, "parts, tires, meters and dispatch radios sold or leased to taxicab operators for use or consumption directly in the rendition of their services." However, Virginia Retail Sales and Use Tax Regulation (VR) 630-10-67(E), copy enclosed, currently provides that, "[a]ccessories, maintenance materials, and all other tangible personal property purchased by a taxicab operator are subject to the retail sales and use tax." (Emphasis added)
In interpreting the scope of sales and use tax exemptions, the Virginia Supreme Court has long followed the rule of strict construction of all exemptions. Under this rule, "[w]hen a tax statute is susceptible to two constructions, one granting an exemption and the other denying it, the latter construction is adopted." See, WTAR Radio-TV v. Commonwealth, 217 Va. 877 at 879, (1977) citing Winchester TV Cable Co. v. Commissioner, 216 Va. 286, 289-290, 217 S.E. 2d 885, 880 (1975).
Since the term "parts" is not defined for purposes of this exemption, it must be given its generally accepted meaning. Webster's New Collegiate Dictionary, (1979 ed.), defines the term "part" to mean, "a constituent member of a machine or other apparatus".
In addition, under the legal doctrine "noscitur a sociis" which translates, "it is known from its associates," the meaning of a word takes color and expression from the purport of the entire phrase of which it is a part, and it must be read in harmony with its context. Turner v. Commonwealth, 226 Va. 456, 309 S.E. 2d 337 (1983). Under this maxim, the term "parts" must be read in the context of the rest of the phrase, which refers to those specific items of tangible personal property similar to tires, meters and dispatch radios, used or consumed directly in the rendition of a taxicab operator's service.
I cannot agree that paint such as that purchased by the taxpayer in the present case is similar to tires, meters, dispatch radios, and similar items used and consumed directly in a taxicab operators service. To extend the exemption to such paints, would also require the department to extend the exemption to similar items, such as materials and supplies used in cleaning taxicabs, or to decals or lettering used on taxicabs. This would result in an expansion of the current exemption far beyond the General Assembly's intent in enacting the exemption.
Based on the foregoing, and the rule of strict construction of all exemption statutes referenced above, I cannot agree that the taxpayer's purchases of paint represented exempt purchases of parts. Therefore, I find no basis for correction of the tax and interest assessed on the taxpayer's paint purchases.
However, under the authority granted in Virginia Code §58.1-105, I do find basis for the waiver of penalties assessed on such paint purchases. Accordingly, to the extent that such penalties were previously paid they will be refunded to the taxpayer, together with interest thereon, since the date of payment.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner