93-5 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Agriculture; Miniature horses

Topic

Taxability of Persons and Transactions

Date Issued

01-08-1993

January 8, 1993

Re: §58.1-1821 Application: Retail Sales and Use Tax

Dear***********:

This will reply to your letter in which you seek correction of a sales and use tax assessment for * * * (the Taxpayer) for the period of November 1984 through September 1990.

FACTS

The Taxpayer operates as an amusement park and breeding facility Miniature horses, and to a lesser extent other animals, are made available for petting, rides, photographs and other entertainment purposes. The Taxpayer contests the tax on the purchase of miniature horses and contends that such purchases are exempt under the agricultural exemption. The Taxpayer further contends that its purchases are exempt under the resale exemption.

DETERMINATION

Agricultural Exemption

Va. Code § 58.1-608(A)(2)(a) provides that certain livestock, feeds and farm machinery are not subject to taxation if such property is used in agricultural production for market. This Code provision is further clarified in Virginia Regulation (VR) 630-10-4 which states that the tax does not apply to the sale of certain tangible personal property to farmers for use in agricultural production for market.

The department has consistently exempted farmers from taxation of their livestock. However, the department has limited its definition of livestock to those traditional farm animals such as cattle, chickens, goats, hogs, and sheep. Nontraditional farm animals are subject to taxation unless specifically exempted in the Code. See, for example, the enclosed Public Document 88-117 in which llama farming was not exempt from taxation prior to the amendment of the agricultural exemption to specifically include llama farming.

While miniature horses serve a number of purposes, I can find no indication that they serve in an agricultural capacity as mandated in the Code; nor can I find that miniature horses are livestock as envisioned in the Retail Sales and Use Tax Act.

Resale Exemption

Va. Code §58.1-602 excludes from the statutory definition of "retail sale' a sale made for resale. However, Va. Code Sec. 58.1-623 states that:

- If a taxpayer . . . makes any use of the property (purchased for resale) other than an exempt use or retention, demonstration, or display while holding property for resale . . . such use shall be deemed a taxable sale by the taxpayer as of the time the property. is first used by him, and the cost of the property to him shall be deemed the sales price of such retail sale.

I understand from discussions you had with members of my staff that most of the miniature horses you purchased were for resale, but that prior to resale the animals were used in breeding and/or in the amusement park for rides and other entertainment. Such use by the Taxpayer of tangible personal property held for resale constitutes a taxable use for which the Taxpayer is liable.

Furthermore, I understand that subsequent to your initial protest to the department's Technical Services Section, certain of the miniature horses originally held as taxable in the audit were removed when you provided evidence that no taxable use had been made of those animals. The assessment was revised accordingly; however, I can find no evidence that further revisions are warranted.

Therefore, the assessment is correct and is now due and payable. Payment copies of the bills, with interest accrued through today's date, will be issued shortly.

Sincerely,

W. H. Forst
Tax Commissioner

Rulings of the Tax Commissioner