Tax Type
Retail Sales and Use Tax
Description
Multi-level marketing company; Collect and remit tax for independent distributors; Handling charges
Topic
Collection of Tax
Returns/Payments/Records
Date Issued
06-09-1993
June 9, 1993
Re: Request for Ruling: Retail Sales and Use Tax
Dear***************
This will reply to your letter of January 7, 1993, in which you request a ruling on registration procedures and other requirements in Virginia for retail sales and use tax purposes.
FACTS
Your client (the "Company") is entering the multi-level network marketing field. The Company will manufacture and sell products to distributors who will resell the products to retail customers. You request a ruling regarding registration procedures and other requirements in Virginia for the and its authorized distributors. You ask if Virginia has a "co-vendor" agreement which allows the multi-level marketing company to register with the state, collect taxes and file returns in its own name; individual distributors would not required to register, collect and remit taxes for sales made to Virginia customers.
You also inquire as to Virginia's treatment of separately stated shipping and handling charges for sales tax purposes.
RULING
Registration Requirements
Va. Code §58.1-612 and Virginia Regulation (VR) 630-10-29.1 (copies enclosed) set forth the "nexus" requirements which give the Commonwealth the authority to require dealers to register for collection and remittance of the sales tax. In the situation described in your letter, each "independent distributor" would be considered a dealer for sales and use tax purposes, as each sells at retail, or offers for sale at retail, tangible personal property in Virginia. Generally, each distributor would be required to register to collect the Virginia sales and use tax. In order to register, a dealer must complete Form R-l (copy enclosed).
In the past, the department has agreed to allow a multi-level marketer to collect and remit sales tax on behalf of its independent distributors. Enclosed is a copy of a sample agreement entered into by the Department and a taxpayer with operations in Virginia similar to those contemplated by your client.
The department analyzes each situation on a case-by-case basis, and a determination is made as to whether a special registration arrangement is warranted. If you desire such a determination, you should request a ruling, setting forth all relevant facts regarding your client's operations.
Shipping and Handling Charges
Virginia Code §58.1-602 defines sales price, in part, as "the total amount for which tangible personal property or services are sold, including any services that are a part of the sale." "Handling charges" are considered a service in connection with a sale and are therefore taxable.
Virginia Regulation (VR) 630-10-107 exempts from the tax separately stated transportation and delivery charges. "Transportation" and "delivery charges" are defined in the regulations as follows:
-
- Charges for delivery from the seller to the purchaser, commonly known as "transportation-out," and includes postage or common carrier charges. Transportation and delivery charges do not include charges from a manufacturer to a retailer's place of business relative to purchases for resale, nor do they include handling charges. Emphasis added.
If nontaxable "shipping" charges are not segregated from taxable "handling" charges, but are combined into a single charge, the entire shipping and handling charge is subject to the Virginia tax.
If you any additional questions, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner