Tax Type
Retail Sales and Use Tax
Description
Jewelry sales and repair; Remittence of tax; Exemption certificates
Topic
Collection of Tax
Exemptions
Returns and Payments
Date Issued
06-29-1992
June 29, 1992
Re: Request for Ruling: Retail Sales and Use Tax
Dear******************
This will reply to your letter requesting a ruling on the application of the retail sales and use tax to jewelers, such as**************** (the Taxpayer).
FACTS
The Taxpayer sells jewelry and its component parts on a wholesale and retail basis. The Taxpayer was audited by the department and it is my understanding that the Taxpayer does not contest the audit findings. However, the Taxpayer contends that the applicable sales and use tax regulations and prior rulings of the department create administrative problems for jewelers in terms of the collection and remittance of the tax on tangible personal property purchased for use in jewelry repair and for resale.
RULING
The principal issues raised by the Taxpayer will be discussed individually:
Sale and Repair of Jewelry/Component Parts
The Taxpayer offers various suggestions for revision of the regulation regarding the jewelry industry.
The Virginia Sales and Use Tax Regulations promulgated by the department set forth the guidelines, policies and procedures for the application of the tax to businesses within the Commonwealth. It is common practice by the department to issue the regulations to each Taxpayer upon registration.
Virginia Regulation (VR) 630-10-99 interprets the law as it relates to jewelers and provides that:
-
- The tax does not apply to charges for repairs made by shoe, leather, jewelry and like repairmen. Purchases of equipment, tools, materials and supplies used in performing such repairs are taxable at the time of purchase. When repairmen go beyond performing repairs and regularly engage in selling tangible personal property, they must register as dealers and collect and pay the tax on retail sales ... (Emphasis added)
- The tax does not apply to charges for repairs made by shoe, leather, jewelry and like repairmen. Purchases of equipment, tools, materials and supplies used in performing such repairs are taxable at the time of purchase. When repairmen go beyond performing repairs and regularly engage in selling tangible personal property, they must register as dealers and collect and pay the tax on retail sales ... (Emphasis added)
Certificates of Exemption
The Taxpayer has experienced difficulty in confirming with the department the validity of sales tax registration numbers noted on certificates of exemption presented by the Taxpayer's customers. In addition, the Taxpayer expresses confusion concerning sales to manufacturers of jewelry.
While the department is precluded from divulging specific tax information under Va. Code §58.1-3, the limited information as to whether a certificate of registration number is valid may be obtained by contacting the department. The Taxpayer as a wholesaler and retailer may purchase jewelry and its component parts under a resale exemption certificate and may sell to a jewelry manufacturer exempt of the tax upon receipt of a manufacturer's exemption certificate (Form ST-11). However, the Taxpayer must remit the use tax on the cost price of materials withdrawn from inventory for use in custom and/or repair work.
Remittance of Tax by Dealers
The Taxpayer wishes to remit the tax based on the month in which the tax is collected rather than the month in which the sale of the tangible personal property occurs.
Va. Code §58.1-603, copy enclosed, requires that the sales tax paid by retailers be computed on "gross sales" for the taxable period. "Gross sales" as defined by Va. Code §58.1-602, copy enclosed, is the sum total of all retail sales of tangible personal property or services as defined in this chapter. A "sale" for purposes of determining the timing of the "gross sales" is defined by Va. Code §58.1-602 as any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property and any rendition of a taxable service for a consideration
Furthermore, VR 630-10-28, which was inadvertently omitted from the department's 1985 sales and use tax regulations but appeared in the 1979 regulations as VR 1-28, copy enclosed, provides that "[a]ny person making conditional, charge or installment sales must report the total selling price and pay the applicable tax for the taxable period in which the contracts of sale are entered into." Thus, sales tax must be paid by the dealer on every sale of tangible personal property or taxable service, whether the sale is an installment sale, charge sale, or cash sale.
Moreover, Va. Code §58.1-615 and §58.1-616, copies enclosed, provide that every dealer required to collect or pay the sales or use tax file a return and pay the tax on or before the twentieth day of the month for the gross sales of the previous month. When a customer makes a purchase and takes immediate possession of the item sold, the sale must be reported for the period in which the sale takes place, notwithstanding that the customer will be allowed to pay over an extended period of time.
This is in contrast to the application of tax to lay-away sales, pursuant to VR 630-10-55, which provides that "[a] sale where delivery is conditional on payment of the amount due on the price of the sale is not completed until the amount due is received by the seller and is taxable when the property is delivered to the customer." Therefore, the tax may be remitted based on the full payment by the customer on delivery of the property to the customer.
I appreciate the compliment paid to the members of my staff and hope the foregoing has responded to your inquiry. If you have additional questions please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/4646J
Rulings of the Tax Commissioner