Tax Type
Retail Sales and Use Tax
Description
Retail sales by agents
Topic
Collection of Tax
Date Issued
06-18-1992
June 18, 1992
Re: Request for Ruling: Sales and Use Tax
Dear*****************:
This will reply to your letter of July 9, 1991 in which you seek a ruling as to the sales and use tax application to various sales scenarios made by an agent assigned to make sales by the principal.
"Retail sale" is defined under Va. Code §58.1-602 as, "a sale to any person for any purpose other than for resale in the form of tangible personal property or services taxable under this chapter."
Va. Code §58-1-603 addresses the imposition of the Virginia sales tax and imposes the tax upon:
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- every person who engages in the business of selling at retail or distributing tangible personal property in this Commonwealth... in the amount of three and one-half percent... of the gross sales price of each item or article of tangible personal property when sold at retail or distributed in this Commonwealth
Virginia Regulation (VR) 630-10-9, copy enclosed, sets forth the application of the retail sales and use tax with respect to auctioneers, agents and factors and states the following:
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- Auctioneers, agents or factors selling tangible personal property must collect and pay the sales tax on the gross sales price of each taxable sale, regardless of the fact that title to the property sold may rest with another person. "Gross sales price" means the price for which the property is sold without any deduction for commissions, service charges or any other expense.
Keeping the above in mind, I will address each scenario set forth in your letter in the order presented.
Scenario A: The seller (principal) sends the horse to the agent to sell. The agent has possession of the horse. The agent sells the horse for the seller, and the gross proceeds of sale, including the sales tax, are paid to the agent and run through the agent's account. A commission is deducted by the agent, and the net proceeds, including the sales tax, are remitted to the seller. Neither agent or seller remits the sales tax to the Department.
Answer: The agent is responsible for collecting and remitting sales tax.
Scenario B: Same facts as A, except no sales tax is collected from the buyer.
Answer: The buyer is responsible for remitting use tax on the purchase price of the horse. In audit, however, the department can assess tax against either the agent (for failure to collect sales tax) or the buyer (for failure to remit use tax).
Scenario C: Same facts as A, except the gross proceeds of sale, including the sales tax, are paid directly to the seller by the buyer and not to the agent.
Answer: Seller should return sales tax collected to the agent for payment to the department.
Scenario D: Same facts as A, except the gross proceeds of sale, excluding the sales tax, are paid directly to seller and not to agent, i.e., no sales tax is collected from the buyer.
Answer: Same as Scenario B.
Scenario E: Would the answers to A, B, C and D remain the same if possession of the horse remained with the seller until the horse was delivered to the buyer.
Answer: Yes.
Scenario F: Same facts as A, except no tax is collected by the agent, because the seller qualifies for the occasional sale exemption. Does this absolve the seller and/or his agent from liability for the sales tax, or is it the agent's sales activities, rather than the seller's, which determine whether the occasional sale exemption would apply to the sale?
Answer: No. VR 630-10-9(B) addresses "occasional sales" by an agent and states the following;
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- "Except as provided in (B)(2) of this section, an auctioneer, factor or agent cannot make an "occasional sale" of tangible personal property because his business is the sporadic and occasional sale of property. Therefore, an auctioneer, factor or agent must collect the tax on all sales including estate sales and similar sales of short duration."
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- The exception provided in (B)(2) involves the sale of all or substantially all of the assets of a business.
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Scenario G: The buyer asks his agent to find a horse to buy. The agent buys a horse for the buyer. The gross proceeds of sale, excluding the sales tax, is paid to the agent and run through the agent's account. A commission is deducted by the agent, and the net proceeds of sale are remitted to the seller, i.e., no sales tax is collected from or paid by the buyer.
Answer: The agent is acting as a purchasing agent for the and should pay the tax on the horse at the time of purchase, provided the seller is a registered dealer. If seller is not required to register as a dealer, i.e. a private individual not in the business of making retail sales or who makes fewer than four sales per year, the sale of the horse would fall under the occasional sale exemption as set forth under VR 630-10-75, enclosed.
Although the issue was not raised in your letter, you may also wish to bear in mind the provisions of VR 630-10-51. This regulation discusses the instances in which an instate seller is not required to collect tax from an out-of-state buyer, i.e., when delivery to the buyer occurs outside Virginia.
I trust the above and the enclosed regulation sections will answer any question you might have. If you should have any additional questions, please feel free to contact the department .
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner