Tax Type
Retail Sales and Use Tax
Description
Out-of-state dealer
Topic
Persons Subject to Tax
Property Subject to Tax
Date Issued
12-30-1991
December 30, 1991
Re: Request for Ruling: Retail Sales and Use Tax
Dear ******************
This will reply to your letter of April 19, 1991 requesting information on the application of the sales and use tax to a transaction involving the sale of tangible personal property between Company P (a Virginia purchaser), Company R (based in Canada) and Company W (based in the U.S. outside of Virginia).
FACTS
Company P purchases merchandise from Company R, who orders the merchandise from Company N with instructions to ship the merchandise directly to the purchaser in Virginia. Company W may ship by common carrier or its own carrier and then invoices Company R who invoices Company P. You ask whether Company W is required to collect Virginia sales tax on its invoice to Company R for its sale to Company P.
Additionally, you request information on the requirements for nexus in Virginia.
RULING
Under Va. Code §58.1-602, "retail sale" means a sale of tangible personal property or taxable services to any person for any purpose other than for resale. Based upon the facts presented, the sale between Company R and Company P is subject to the Virginia tax, unless the transaction is otherwise exempt under Virginia law. Company W's role is that of a supplier of merchandise to Company R for resale. Since Company P is not making a purchase from Company W but from Company R, Company W is not obligated to collect the Virginia tax from Company P. Additionally, the transaction between Company W and Company R is not subject to the tax as it is an exempt sale for resale, provided adequate records are maintained.
The Virginia Department of Taxation has no authority to require out-of-state dealers to register for collection and remittance of the sales and use tax unless they have sufficient nexus with the state. Va. Code §58.1-612 (copy enclosed) provides the criteria for determining whether a dealer has sufficient activity with Virginia to require registration. In the event Company R is not required to register with Virginia, Company P would be required to remit use tax directly to the department.
I hope the foregoing has responded to your inquiry. If you have additional questions, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/5121J
Rulings of the Tax Commissioner