Tax Type
Retail Sales and Use Tax
Description
Temporarily stored in Virginia; Computers used by Real Estate Multiple Listing Service; Refund request
Topic
Property Subject to Tax
Date Issued
03-04-1994
March 4, 1994
Re: Request for Ruling: Sales and Use Tax
Dear**************
This will reply to ******** letter requesting reconsideration of the department's April 10, 1989 ruling on behalf of your client, ***********("the Taxpayer").
FACTS
The Taxpayer, a Virginia based corporation, provides a real estate information listing service to brokers, agents and Multiple Listing Services across the United States. This service enables subscribers to access information on listings of real property. Components of the service provided by the Taxpayer include loaned computer hardware; a continually updated data base on properties sold or available for sale; the software necessary to access this data base; real estate listing books; and the servicing/repair of equipment.
The Taxpayer has paid sales and use tax on all hardware located and used by the Taxpayer in Virginia and on hardware loaned to its customers located outside the state. The Taxpayer seeks a refund of sales tax paid on that hardware and related software temporarily stored for testing by the Taxpayer in Virginia before shipment for use outside the state by its customers.
The department's April 10, 1989 ruling (P.D. 89-119) denied the Taxpayer's request for refund, finding that the Taxpayer was subject to the sales and use tax on the tangible personal property in question. The Taxpayer requests reconsideration contending that no taxable use of the property occurs in Virginia and that the property is exempt as property purchased for future lease or rental under Va. Code §58.1-608 (A)(10)(c). In the alternative, the Taxpayer requests proration of the tax under Va. Code §58.1-604.
RULING
I have reviewed the April 10, 1989 ruling in light of your most recent comments; however, I do not find basis to revise the original ruling. As explained in the prior ruling, unlike the taxpayers in the department's June 23, 1988 ruling (P.D. 88-159) and the opinion of the Attorney General dated October 30, 1987 (a copy of which was attached to P.D. 88-159), the Taxpayer in this case is not storing equipment for sale at retail. In addition, unlike the taxpayers in other rulings cited by the Taxpayer, P.D. 85-162 (8/29/85) and P.D. 85-91 (4/30/85), the Taxpayer is not deemed to be holding the equipment for future lease.
Instead, the Taxpayer was storing equipment for its own use and consumption in providing a nontaxable service (under Virginia Regulation (VR) 630-10-97.1) to customers located both within and outside the state. As the Taxpayer is deemed in Virginia to be providing a nontaxable service, any property used in providing the service is taxable when delivered to the Taxpayer in Virginia. This is true notwithstanding that another state might subsequently deem the transaction to represent the lease of tangible personal property or the provision of a taxable service. Further, as explained in the previous ruling to the Taxpayer, the subsequent transfer of the equipment outside the state would not immunize the initial purchase of the equipment within Virginia from sales and use tax.
I also find that the use tax would be properly computed based on the full cost price of the property stored in Virginia. Va. Code §58.1-604 (also see VR 630-10-109.D) provides for proration of the use tax based on actual usage in Virginia under extremely limited circumstances, i.e. when "tangible personal property... has been acquired for use outside this state and subsequently becomes subject to the [Virginia] tax." In this instance, the property was not acquired for use outside the state as the taxpayer made first use of the property within Virginia.
Based on all of the foregoing, I find no basis for the refund requested.
Sincerely,
Danny M. Payne
Acting Tax Commissioner
Rulings of the Tax Commissioner