Tax Type
Retail Sales and Use Tax
Description
Common Carriers; Bills of Lading and Packaging Materials
Topic
Taxability of Persons and Transactions
Date Issued
05-02-1991
May 2, 1991
Re: Request for Ruling: Sales and Use Tax
Dear*************
This will reply to your letter of July 16, 1990 in which you request a ruling on the applicability of the sales and use tax to various items supplied by your client, an interstate common carrier of property (the "Taxpayer"), to its Virginia customers free of charge.
FACTS
The Taxpayer, an interstate common carrier of property holding an ICC permit, purchases bills of lading, envelopes and boxes which are furnished to its clients free of charge for use in shipping property via the Taxpayer. The Taxpayer has been paying the applicable tax based on the location of its warehouses to which the property is shipped by the supplier. It does not have a warehouse located in Virginia.
You request a ruling as to whether the bills of lading, envelopes, etc., when shipped to customers in Virginia by the Taxpayer for use in shipping property in interstate commerce are subject to the sales and use tax.
RULING
Va. Code §58.1-608(3)(c) provides an exemption from the sales and use tax for tangible personal property for use or consumption by a common carrier directly in the rendition of its public service. A common carrier must be authorized to operate under a certificate of convenience and necessity issued by the State Corporation Commission or the Interstate Commerce Commission in order to qualify for this exemption.
Virginia Regulation (VR) 630-10-24.3, copy enclosed, explains that the applicability of the sales and use tax exemption for tangible personal property purchased by a common carrier operation depends on the use rather than the type of property. The same item may be taxable in one instance and exempt in another, depending entirely upon its usage.
The regulation further explains that tangible personal property used in the transport function of a common carrier is deemed to be used directly in the rendition of the public service and is not subject to the tax. It further explains that the transport function encompasses the actual performance of common carrier duties, i.e., the receipt, pickup, over-the-road transport, delivery and protection of property, and similar functions essential in the transport of property. Waybills, freight bills, and bills of lading carried with the freight being transported and cartons, barrels, sealing tape, etc., are listed in the example as being exempt from the tax.
Thus, the bills of lading and packaging materials supplied by the Taxpayer to its Virginia customers free of charge for use in shipping property in interstate commerce are not subject to the tax, provided the Taxpayer does not provide storage for its customers property. VR 630-10-24.3 provides that tangible personal property used in the storage function is taxable.
If you have any further questions, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner