Tax Type
Retail Sales and Use Tax
Description
Ship supply chandler; Ships and vessels
Topic
Exemptions
Property Subject to Tax
Date Issued
03-18-1991
March 18, 1991
Re: Va. Code §58.1-1821 Application/Sales and Use Tax
Dear*****************
This will reply to your letter of February 28, 1990, on behalf of your client,********(the Taxpayer), seeking correction of a sales and use tax assessment for the period of December 1, 1985 through November 30, 1988.
FACTS
The Taxpayer, a ship supply chandler, was audited and held liable for the tax on sales for which no sales tax was collected nor exemption certificate obtained from the customer. The Taxpayer contests the inclusion of sales to the****************(the Customers) in the audit sample. The Customers are vessels in the business of performing offshore research for the United States Navy and also laying an undersea transoceanic cable system for the government of Taiwan. The Taxpayer alleges that sales to the Customers qualify for the exemption from the tax under Va. Code §58.1-608(3)(d).
DETERMINATION
Va. Code §58.1-608(3)(d) extends the sales and use tax exemption to:
-
- Ships or vessels used or to be used exclusively or principally in interstate or foreign commerce, or repairs and alterations thereof; or fuel and supplies for use or consumption aboard ships or vessels plying the high seas, either in intercoastal trade between ports in the Commonwealth and ports in other states of the United States or its territories or possessions, or in foreign commerce between ports in the Commonwealth and ports in foreign countries, when delivered directly to such ships or vessels; or tangible personal property used directly in the building, conversion or repair of the ships or vessels covered by this subdivision. (Emphasis Added.)
For transactions to qualify for this exemption, three conditions must be satisfied:
1. It must be a sale of fuel and/or supplies for use or consumption aboard the ship or vessel.
2. The ship or vessel must ply the high seas, either in intercoastal trade between ports in the Commonwealth and ports in other states of the United States or its territories or possessions, or in foreign commerce between ports in the Commonwealth and ports in foreign countries.
3. The fuel or supplies must be delivered directly to such ships or vessels.
Based upon the facts presented, the sales to the Customers would be exempt under Va. Code §58.1-608(3)(d); therefore, I find basis for the removal of the Customer's activities from the audit sample. The removal of said invoices should negate any contentions the Taxpayer may have concerning the validity of the sample used in determining the sales liability.
A representative from the department will contact the Taxpayer as soon as practicable to make the proper adjustments. If you should have any further questions, please feel free to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner