Tax Type
Retail Sales and Use Tax
Description
Interstate transactions; Contract purchases by foreign government
Topic
Taxability of Persons and Transactions
Date Issued
03-05-1993
March 5, 1993
Re: Request for Ruling: Retail Sales & Use Tax
Dear*************
This will reply to your letter of May 28, 1992, in which you request a ruling on the sales and use tax as it applies to interstate commerce transactions of the *********** (the "Taxpayer").
FACTS
The Taxpayer is a foreign government which does a great deal of business in the United States. Typically their contracts provide that title passes upon payment to the extent of that payment. This frequently takes the form of progress payments as the work progresses, and they acquire title on that basis. They seek answers to the two (2) questions shown below concerning sales and use tax as it applies to Virginia Regulation 630-10-51:
-
- _ Do both title and possession have to pass outsideVirginia or is it sufficient if one passes outside the state while the other passes inside the state?
_ Is it the case that the tax will not attach in spite of the typical title provisions in our contracts as long as the property which we are buying is delivered by the seller FOB common carrier contractor's plant for delivery outside of Virginia?
- _ Do both title and possession have to pass outsideVirginia or is it sufficient if one passes outside the state while the other passes inside the state?
RULING
Va. Code §58.1-608(A)(10)(d) exempts the "[d]elivery of tangible personal property outside the Commonwealth for use or consumption outside the Commonwealth." Interpreting this statute, Virginia Regulation (VR) 630-10-51 provides that sales qualifying for the exemption include those where delivery is made to the purchaser outside Virginia by the U.S. Postal Service, an independent trucker, a contract carrier, or a common carrier hired by the seller.
Further, the regulation provides that the exemption only applies to sales where first use of the property occurs outside the Commonwealth. As held by the Virginia Supreme Court in Commonwealth of Virginia of Taxation v. Miller-Morton Company, 220 Va. 852 (1980), copy enclosed, the fact that property will ultimately be delivered outside Virginia is of no bearing if a taxable event occurs in Virginia.
Thus, the exemption applies to the Taxpayer so long as the seller delivers the goods to the Taxpayer by common carrier or one of the other methods listed above, provided physical or constructive possession does not occur in Virginia. If, for example, the Taxpayer purchases property and has the seller deliver it by common carrier to a contractor's plant located in Virginia, the Taxpayer has made first use of the property in Virginia and will be liable for the tax, even if the taxpayer intended the property to be subsequently delivered to them in another state or country.
I trust this answers your questions, but please contact the department if additional questions arise.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6191M
Rulings of the Tax Commissioner