Tax Type
Retail Sales and Use Tax
Description
Application of sales and use tax; Use tax on sample windows
Topic
Taxability of Persons and Transactions
Date Issued
05-12-1994
May 12, 1994
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear **********
This will reply to your letter on behalf of ********* (the "Taxpayer") concerning a sales and use tax audit for the period July 1, 1988 through March 31, 1991.
FACTS
The Taxpayer is a Virginia corporation engaged in manufacturing vinyl replacement windows which it distributes to its wholesale branches located inside and outside of Virginia. These branches, in turn, sell the windows to their customers, who are primarily contractors. In addition, at the request of the branch, the Taxpayer fabricates sample windows for salesmen to use in promoting the sale of window products. The Taxpayer paid the use tax on the samples based on the state of final destination. The Taxpayer contests the audit assessment issued for samples manufactured in Virginia and shipped to branches located in other states, and is requesting that the tax and accompanying penalty and interest assessed on these samples be abated since they have paid the tax to the state of final destination.
DETERMINATION
Va. Code §58.1-604, copy enclosed, imposes the use tax on the purchase of tangible personal property used or consumed in Virginia. The term "use" is defined in Va. Code §58.1-602, copy enclosed, as "the exercise of any right or power over tangible personal property incident to the ownership thereof, except that it does not include the sale at retail of that property in the regular course of business." In accordance with Virginia Regulation (VR) 630-10-51(B), copy enclosed, the first use of tangible personal property in Virginia constitutes a taxable event even if the item is subsequently shipped out of Virginia.
This position was upheld by the Virginia Supreme Court in Commonwealth v. Miller-Morton, 220 Va, 852, 263 S. E. 2d 413 (1980), copy enclosed.
When the sample windows are fabricated in Virginia and shipped to out-of-state salesmen for use as a promotional display, first use of the windows occurred in Virginia; therefore, the Virginia tax applies.
Based on the information presented, I find no basis for adjustment of the tax assessed. However, based upon the facts involved, I find basis to waive the penalty assessed. In addition, due to the delay in responding to your original letter, I will agree to stop the accrual of interest as of September 5, 1991. Please remit ********to this office within 45 days from the date of this letter. This payment represents tax and interest of******** and ******** respectively.
The payment should be directed to******** Office of Tax Policy, Department of Taxation, P.O. Box 1880, Richmond, Virginia 23282-1880.
Sincerely,
Danny M. Payne
Acting Tax Commissioner
OTP/5557N
Rulings of the Tax Commissioner