Tax Type
Retail Sales and Use Tax
Description
Manufacturer of modular and panelized homes; apply primary purpose test to its dual capacity operation
Topic
Computation of Tax
Date Issued
02-17-1993
February 17, 1993
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This will reply to your letter of August 20, 1992 in which you seek reconsideration and clarification of the determination rendered in P.D. 92-114 (6/29/92) pertaining to **** (the Taxpayer).
FACTS
The Taxpayer is a manufacturer of modular and panelized homes which are either furnished and erected by the Taxpayer or sold nonerected to the purchaser. The Taxpayer operates two facilities in Virginia and requests prospective treatment in applying the primary purpose rule to its dual capacity operation. Additionally, the Taxpayer requests clarification of (1) the annual period for computing the primary purpose test - fiscal or calendar year basis; and (2) whether gross receipts derived from Virginia sales only should be used in computing the primary purpose test.
DETERMINATION
Prospective Treatment
Virginia Regulation (VR) 630-10-27(E) sets forth the application of the primary purpose rule as it relates to manufacturers and VR 63010-84.1 specifically addresses the application of tax to prefabricated house sections. Both regulations have been in effect since 1979 and in addition, the department has rendered consistent opinions as a matter of established policy regarding this subject matter. Accordingly, the rules and regulations applicable to the Taxpayer's business operation are not new or particularly unique so as to justify a prospective treatment in this case.
Fiscal v. Calendar Year
The primary purpose test may be computed on either a fiscal or calendar year basis provided that the same basis is used consistently from year to year.
Total Sales v. Virginia Sales
The Taxpayer must apply the primary purpose test to gross receipts derived from sales generated at the particular facility under audit regardless of the destination of the sales (instate or out-of-state). Since established policy dictates the application of the primary purpose rule per facility as opposed to applying the rule on a consolidated basis, it can be reasonably concluded that the base for computing the primary purpose test must be restricted to sales generated for each individual facility.
Based on the foregoing, and having previously rendered a determination requiring computation of the primary purpose test on a plant by plant basis, the determination rendered in P.D. 92-114 (6/29/92) stands and as such, the assessment is due and payable. An updated "Notice of Assessment" will be mailed under separate cover and should be paid within 30 days to avoid the accrual of additional interest.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6441J
Rulings of the Tax Commissioner