Tax Type
Retail Sales and Use Tax
Description
Motor Fuels; Fuel Used to Perform Maintenance Contract
Topic
Taxability of Persons and Transactions
Date Issued
08-27-1992
August 27, 1992
Re: §58.1-1821 Application: Sales and Use Tax
Dear**************
This will reply to your letter of May 31, 1991 in which you are seeking relief of tax and interest recently assessed as a result of a sales and use tax audit of your client,**************(the Taxpayer).
FACTS
The Taxpayer is a subsidiary of a refuse disposal company. The Taxpayer's only activity is to provide maintenance for trucks run by the disposal company and two other subsidiaries. The maintenance is provided under a monthly lump-sum contract fee per truck which includes parts, labor, and fuels needed for everyday operation of the trucks. The Taxpayer did not collect any tax on the monthly contract fees which comprise 100% of the audit measure. The Taxpayer did pay the sales or use tax on all parts furnished in fulfilling the contract for which the auditor did allow a credit. The auditor did not allow a credit for the cost of fuel included in the monthly maintenance fee. The Taxpayer is requesting removal of the fuel from the monthly maintenance fee based on the fact the motor fuel tax was paid at the time the fuel was purchased, therefore, the retail sales and use tax is not applicable based on Virginia Regulation (VR) 630-10-69.
DETERMINATION
The application of the sales and use tax to maintenance contracts is set forth in VR 630-10-62.1, copy enclosed. Under the regulation, contracts which provide for both service and the provision of repair or replacement parts for the covered property are subject to the retail sales and use tax on the total contract fee. In the case at hand, the maintenance contract includes parts, labor, and fuels, thus subjecting the total contract amount to the retail sales and use tax.
However, the application of the retail sales and use tax to motor vehicle fuels is set forth in VR 630-10-69. This regulation provides that the retail sales and use tax does not apply to motor vehicle fuels subject to motor vehicle or special fuel taxes under Va. Code §58.1-2100 et. seq.
The application of the retail sales and use tax to the maintenance contracts in question was assessed strictly in accordance with VR 630-10-62.1, I. e. maintenance contracts which include repair and replacement parts. The tax application has no direct correlation to the taxing of motor vehicle fuels subject to the tax under Va. Code §58.1-2100. However, due to the fact the Taxpayer has internal records available from which fuel sales can be itemized, I will allow the removal of the fuel sales from the audit measure in this instance. In the future, should the Taxpayer continue to include parts, labor, and fuel in the total maintenance contract amount, the total contract fee will be taxable. Upon verification of the motor vehicle fuel included in the contract fee for the audit period in question, the audit will be adjusted accordingly.
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