Tax Type
Retail Sales and Use Tax
Description
Propane used by manufacturer for both exempt processing and general heating
Topic
Exemptions
Property Subject to Tax
Date Issued
10-08-1991
October 8, 1991
Re: §58.1-1821 Application: Retail Sales & Use Tax
Dear*****************
This will reply to your letter of April 8, 1991 in which you seek correction of recent sales and use tax assessment to ************ (the "Taxpayer") for the period June 1987 through May 1990.
FACTS
The Taxpayer is a manufacturer of new and retread tires. While a majority of the issues originally contested in the audit have been resolved, one issue remains - the taxability of propane gas purchases. The Taxpayer uses the gas in exempt production activities as well as for heating purposes.
The Taxpayer contests the percentage of propane fuel determined by the auditor to be used for nonexempt (heating) purposes. It maintains that the usage should be based on five heating months whereas the auditor based the usage on eight heating months.
DETERMINATION
Va. Code §58.1-608(A)(3)(b) provides an exemption, in pertinent part, from the sales and use tax for:
-
- machinery or tools or repair parts therefor or replacements thereof, fuel, power, energy, or supplies used directly in processing, manufacturing, refining, mining or conversion of products for sale or resale.
- machinery or tools or repair parts therefor or replacements thereof, fuel, power, energy, or supplies used directly in processing, manufacturing, refining, mining or conversion of products for sale or resale.
As noted above, the major difference between the Taxpayer's and auditor's calculations centers around what constitutes the heating season. The Taxpayer maintains that the heating season consists of five months (January - March, November and December) whereas the auditor's heating season consists of eight months (January - May, October - December). Another difference is in the gallons of propane used in November 1989. The Taxpayer maintains that ********gallons were used, yet the auditor has invoices for fuel purchased in the month of November totalling*********gallons.
From a review of the information provided on the gallons of propane used and the units produced in the 1988-1989 period and in light of the climate of the region of the state within which the Taxpayer is located, it appears that the auditor's assumptions are very reasonable and properly reflect the taxable percentage of propane purchases.
Thus, I find no basis for revising the assessment and issuing a refund to the Taxpayer.
If you have any questions, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/5131H
Rulings of the Tax Commissioner