Tax Type
Retail Sales and Use Tax
Description
Dual role carrier (common and contract)
Topic
Taxability of Persons and Transactions
Date Issued
08-04-1989
August 4, 1989
Re: Ruling Request/Sales and Use Tax
Dear****************
This is in response to your letter dated July 11, 1989 requesting clarification of the sales and use tax exemption as it pertains to common carriers and contract carriers.
FACTS
**************is a transportation business operating as both a common carrier and a contract carrier. As a result of a recent sales and use tax audit, it was determined that some of the supplies and repair parts used by would be subject to the sales and use tax. *******became certified with the Interstate Commerce Commission as a common carrier on October 10, 1986. On May 5, 1987 *****became authorized to do business as a contract carrier by the Interstate Commerce Commission. The fact that is operating in a dual capacity, both as a contract carrier and a common carrier, would exempt items used directly in the rendition of its public service as a common carrier, and at the same time tax items when operating as a contract carrier.
RULING
§58.1-608(10) of the Code of Virginia provides that the tax does not apply to:
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- "Tangible personal property sold or leased to (i) a public service corporation subject to a state franchise or license tax upon gross receipts,... for use or consumption by such corporation, company, person or mutual association directly in the rendition of its public service, and tangible personal property sold or leased to a public service corporation engaged in business as a common carrier of property...by motor vehicle..., for use or consumption by such common carrier directly in the rendition of its public service."
This code section establishes the sales and use tax exemption afforded to common carriers. We must look to the Virginia Retail Sales and Use Tax Regulations to find how the exemption distinguishes itself between common carriers and contract carriers. §630-10-24.3 provides that in order to qualify for this exemption, "[a] common carrier must be authorized to operate under a certificate of convenience and necessity issued by the State Corporation Commission or the Interstate Commerce Commission." This fact has already been established. In addition this section states clearly that the exemption "applies only to common carriers of property by motor vehicle, including restricted common carriers, and has no application to contract or other carriers."
Subsection C of this same regulation addresses proration, which would apply to your situation. Subsection C reads as follows:
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- "It is possible for an item of tangible personal property to be used in both a taxable and exempt manner. For example, tools to repair vehicles used in both contract and common carrier activities or a forklift may be used in both storage and temporary deposit. In such instances the tax due on the item is prorated between the percentage of time the property is used in a taxable manner and the percentage of time used in an exempt manner."
- "It is possible for an item of tangible personal property to be used in both a taxable and exempt manner. For example, tools to repair vehicles used in both contract and common carrier activities or a forklift may be used in both storage and temporary deposit. In such instances the tax due on the item is prorated between the percentage of time the property is used in a taxable manner and the percentage of time used in an exempt manner."
I hope this has answered any questions you might have. If you should have any further questions, please feel free to contact this department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner