Tax Type
Retail Sales and Use Tax
Description
Repairs performed out-of-state by Virginia dealer
Topic
Taxability of Persons and Transactions
Date Issued
09-28-1989
September 28, 1989
Re: Ruling Request/Sales and Use Tax
Dear*****************
This will reply to your letter of June 6, 1989 in which you request a ruling on the sales tax application for repair work done out of state.
FACTS
Your client is a registered Virginia dealer which sells tangible personal property to customers in the state of Virginia. In addition, your client also does non-warranty repair service for equipment sold which does not function properly. The repair facility is located entirely within a state other than Virginia. It is the responsibility of the owner to ship items needing repair to the out of state facility. All repair parts are purchased outside the state of Virginia and the sales tax is paid locally at the time of purchase. once the equipment is repaired, the equipment is shipped back to its owner in Virginia and the owner is billed for repair services only.
RULING
Due to the fact that your client is a registered Virginia dealer, it is required to collect the sales and use tax on all tangible personal property sold in Virginia. §58.1-604 of the Code of Virginia deals with the imposition of the use tax and states, "There is hereby levied and imposed, in addition to all other taxes and fees now imposed by law, a tax upon the use or consumption of tangible personal property in this State...". § 630-10-90 of the Virginia Retail Sales and Use Tax Regulations addresses repair businesses and states, "Any person engaged in the business of repairing tangible personal property is required to register and to collect and pay the tax.
If the dealer performing the repair work does not separately state, itemize or segregate at a fixed or retail price, the parts, materials or supplies sold, the tax will apply to the total charge including repair labor...". This section goes on to state, "Replacement parts, materials and supplies that are transferred to the customer may be purchased under certificate of exemption...".
Keeping the above Code and Regulations cites in mind, Section 630-10-76 of the Regulation entitled "out of state vendors" states, "Every person outside this state who engages in business in this state as a dealer... is required to register and to collect and pay the tax on all tangible personal property sold or delivered for storage, use or consumption in this state...". Due to the fact that your client is a registered Virginia dealer and is also performing repair work on equipment which is shipped into Virginia, it would be required to collect the Virginia use tax on repair parts to the extent that it is not required to collect a sales tax in the state in which the repairs are made. If your client does not separately state parts and labor, the use tax would apply to the total charge.
In regard to sales tax paid by your client on repair parts, sales tax exemption should be pursued within the state where its repair facility is located.
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