Tax Type
Retail Sales and Use Tax
Description
Interstate and foreign commerce; Firearms
Topic
Taxability of Persons and Transactions
Date Issued
10-09-1990
October 9, 1990
Re: §58.1-1821 Application/ Sales and Use Tax
Dear***************
This will reply to your letter of January 25, 1990, on behalf of your client, *********** seeking the correction of a sales and use tax assessment issued for the period of September, 1986 through July, 1989.
FACTS
********("the Taxpayer") is engaged in the retail sale of firearms and accessories. An audit of the Taxpayer by the department produced an assessment for the Taxpayer's failure to collect the sales tax on its sales of firearms to foreign persons visiting the United States. The Taxpayer's customers took delivery of the firearms while in Virginia and later transported them out of the country. There is no evidence presented that the Taxpayer's customers purchased the firearms for resale or under a diplomatic tax exemption card issued by the US Department of State.
The Taxpayer contests the assessment, contending that the transactions are exempt as sales in interstate or foreign commerce under Virginia Regulation 630-10-51.
DETERMINATION
Virginia Regulation (VR) 630-10-51 states in part that "[t]he sales and use tax does not apply to sales of tangible personal property in interstate or foreign commerce." However, the regulation provides that "[a] sale in interstate or foreign commerce occurs only when title or possession to the property being sold passes to the purchaser outside of Virginia and no use of the property is made within Virginia." (Emphasis added)
The interstate commerce exemption cannot be used to exempt the transactions at issue in this case, since the Taxpayer's customers took title to and possession of the firearms in Virginia. The customers' subsequent transporting of the property outside this State could not immunize their initial purchase of the property within Virginia from sales and use taxation. See Commonwealth v. Pounding Mill Quarry, 215 Va. 647, 212 S.E.2nd 428 (1975). Further, the fact that tangible personal property may be intended for delivery outside the state has never precluded the imposition of the sales and use tax on such property, when it is held in Virginia prior to such delivery outside the state. See Commonwealth v. Miller-Morton, 220 Va. 852, at 858, 263 S.E. 2d 413, (1980).
In addition, the transactions in question do not come under the portion of the exemption in VR 630-10-51 for "the delivery to a factor or export agent of tangible personal property for foreign export," since in taking delivery of the firearms, the Taxpayer's customers act in their own capacity. Moreover, the department has recently ruled in a similar case that the terms "factor" and "export agent" in the above cited regulation refer to a middleman or jobber who sells merchandise for a manufacturer. ( See Public Document #90-112, copy enclosed.) Therefore, the Taxpayer's customers in this case are not "factors" or "export agents," within the meaning of the regulation.
Based on all of the foregoing, I find no basis for a correction of the assessment. However, if the Taxpayer can provide evidence that the sales of any of the firearms in question were made pursuant to an appropriate diplomatic tax exemption card, then the applicable transactions will be removed from the department's audit. Such information should be remitted within 30 days to the department's Technical Services Section, office Services Division, P.O. Box 6-L, Richmond, Virginia 23282. If the requested information is not received by the department within this time period, the assessment will be payable in full.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner