Tax Type
Retail Sales and Use Tax
Description
Independent contractor; Mail order business
Topic
Taxability of Persons and Transactions
Date Issued
08-04-1989
August 4, 1989
Re: Ruling Request/Sales and Use Tax
Dear***************
This will reply to your letter of April 19, 1989 seeking information on the application of the sales and use tax to sales in Virginia by your out-of-state client through mail order, or independent contractors.
FACTS
You state that most of your client's goods are sold at wholesale to a network of independent contractors located in Virginia, who then resell them at retail to their own customers. Your client does not provide samples of its goods to the independent contractors, and sales need not be approved in advance by your client.
A small portion of your client's goods are shipped directly to consumers in Virginia generated by mail order catalogs sent directly to customers through the mail by your client. The names and addresses of its mail order customers are obtained from lists provided by its independent contractors. The catalogs sent by your client have the names of the independent contractors on them and the independent contractors receive commissions for mail order sales made to their customers.
Your client has no other contacts within Virginia, maintains no place of business, has no employees, and owns no property in this state. Accordingly, you assert that your client is not required to register with the department to collect and report the tax on its sales to Virginia customers.
RULING
Virginia Code §58.1-612(C), copy enclosed, provides in pertinent part that "[a] dealer shall be deemed to have sufficient activity within the State to require registration under §58.1-613 if he...[s]olicits business in this State by employees, independent contractors, agents or other representatives. (Emphasis added).
Under the foregoing statute, by soliciting business through independent contractors located in Virginia, your client has subjected itself to Virginia's sales and use tax registration and reporting requirements. Therefore, your client must become registered with the department to collect and remit the tax on all of its retail sales to Virginia customers, such as those made by mail order. However, your client need not charge the tax on its sales of merchandise to its independent contractors, provided it receives resale certificates of exemption, (Form ST-10), from them. of course, the subsequent retail sale of the merchandise by such independent contractors would be taxable, absent some other applicable exemption.
For your convenience, I have enclosed a copy of the department's registration application and business reply envelope. I hope that the foregoing has responded to your questions, but let me know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner