Tax Type
Retail Sales and Use Tax
Description
Interstate and Foreign Commerce; Merchandise Shipped Out-of-State
Topic
Taxability of Persons and Transactions
Date Issued
08-02-1991
August 2, 1991
Re: Request for Refund: Sales and Use Tax
Dear*****************
This will reply to your letters in which you request a refund of taxes collected and paid to the State of Virginia in error on sales of merchandise shipped to North Carolina by******************(the Taxpayer).
FACTS
The Taxpayer is a Virginia corporation which operates in the states of Virginia, North Carolina, South Carolina and Florida. The Taxpayer, as an amusement service company, makes sales to related companies in the aforementioned states. These related companies are separate legal entities with some common ownership of the principals.
The Taxpayer and its related companies were the subject of a sales and use tax audit by the state of North Carolina for the period June 1, 1986 through March 30, 1990. The Taxpayer receives all sales orders and merchandise for resale at its Virginia headquarters where it maintains a warehouse. According to a recent phone conversation with a member of my staff, you indicated the merchandise is received in bulk in boxed cases and is sorted and repackaged into smaller quantities in plastic bags for shipment in your company's own vehicles, to your company's own North Carolina warehouses. The merchandise is then picked up from the warehouses by the related company for its use in North Carolina. The North Carolina auditor has interpreted these transactions as North Carolina sales and applied the tax.
Therefore, the Taxpayer contends that these sales are not subject to Virginia sales tax because the merchandise was shipped out of state. The Taxpayer requests a refund of sales tax collected and paid on sales of merchandise shipped to North Carolina in the amount of
RULING
Virginia Regulation (VR) 630-10-51 provides that the tax does not apply to "sales of tangible personal property in interstate or foreign commerce." This regulation provides further 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 [by the purchaser] within Virginia."
Based on the foregoing, I find that these transactions qualify as sales in interstate commerce and are therefore exempt from the Virginia Sales and Use Tax. The fact that you repackage the merchandise for resale purposes at the Virginia warehouse prior to shipment to your North Carolina warehouses does not preclude qualification for the exemption provided: (1) no use is made of the materials in Virginia while holding them for resale; and (2) the materials are in fact resold for consideration to a separate corporation.
VR 630-10-89 (copy enclosed) explains the refunding of sales and use taxes to dealers. Please forward the necessary information along with a copy of this letter to the department's Office Services Division, Taxpayer Assistance Section, P.O. Box 6-L, Richmond, Virginia 23282. In determining the refund, if any, due to the Taxpayer, it may be necessary for the department to review the Taxpayer's records to ensure that Virginia tax was actually paid on the materials subsequently taxed by North Carolina.
If you have any further questions please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner