Tax Type
Retail Sales and Use Tax
Description
Transportation equipment; Tires; Waste tire disposal fee
Topic
Taxability of Persons and Transactions
Date Issued
08-10-1994
August 10, 1994
Re: Request for Ruling: Sales and Use Tax
Dear**************
This will reply to your letter of April 8, 1994 in which you request a ruling as to the retail sales and use tax application to the waste tire disposal fee charged by tire and automotive dealers.
FACTS
********************* (the "Association") represents tire dealers across the Commonwealth. When a tire dealer in Virginia sells a tire, in most cases the dealer will charge the customer a waste tire disposal fee. The fee allows the customer to return the used or worn tire to the dealer so that the tire will be disposed of properly. In some cases the waste tire disposal fee is built into the sales price of the tire. In other cases the dealer may make a separate charge for the disposal fee. The Taxpayer is requesting a ruling as to the retail sales and use tax application to separately stated waste tire disposal fees.
RULING
Va. Code 58.1-602 defines "sales price" as "the total amount for which tangible personal property or services are sold, including any services that are a part of the sale... without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any expenses whatsoever." Virginia Regulation (VR) 630-10-97.1 addresses services and subsection A of this regulation, which addresses taxable services, states, "the tax does apply to charges made for... any services included in or in connection with the sale of tangible personal property." (Emphasis added).
As provided in your letter, the waste tire disposal fee charged by tire dealers is clearly a service provided in connection with the sale of tangible personal property. The service alone is often of little value to the customer without the provision of the tangible personal property sold, i.e. tires. Also, unlike typical waste disposal fees, it is structured as an integral part of the sale transaction and is billed along with the sale. The department has historically taken this position on similar "service" transactions that take place in connection with the sale of tangible personal property, such as alteration charges, gift wrap charges, charges for scotchguarding furniture, charges for dismantling leased equipment, and charges for the firing of greenware. For these reasons, I find the waste tire disposal fee made in conjunction with the sale of tangible personal property to be taxable, whether separately stated or not. Likewise, waste tire disposal fees without the provision of tangible personal property would be exempt.
In regard to tire and automotive dealers previously audited and assessed the sales tax on tire disposal and other environmental fees, the department will remove all such fees from the audits. In turn, the department will work with the Association to initiate an industry-wide voluntary compliance program which will allow all tire and automotive dealers to come into compliance on a prospective basis. Prospectively, all tire and automotive dealers will be expected to properly charge the tax to their customers.
The department looks forward to working with your Association to increase members' awareness of this issue through a tax bulletin or other means. A member of my staff will be contacting you shortly to begin working out the details of the voluntary compliance program.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/7831K
Rulings of the Tax Commissioner