Tax Type
Retail Sales and Use Tax
Description
Financial institutions; Commercial check printer
Topic
Taxability of Persons and Transactions
Date Issued
06-16-1995
June 16, 1995
Re: Request for Ruling: Retail Sales and Use Tax
Dear**********
This will reply to your letter of February 22, 1995, on behalf of*********** (the "Taxpayer"), in which you request a ruling on the application of the tax to sales of checks by banks, savings and loans, credit unions and other financial institutions (collectively, "financial institutions").
FACTS
The Taxpayer is a commercial check printer that prints checks and related items for financial institutions. As a service to their depositors, financial institutions place orders for checks with the Taxpayer. The Taxpayer prints and ships the orders to the depositors and bills the applicable financial institutions, who then debit their depositors' accounts.
The department has traditionally treated financial institutions as dealers with respect to sales of checks, checkbooks, and other items of tangible personal property (see Virginia Regulation [VR] 630-10-12, copy enclosed). The department also issued a ruling dated July 23, 1980, which stated that a financial institution met the definition of a "dealer" as defined in the Code of Virginia with respect to sales of checks and checkbooks. Thus, financial institutions are required to register for the collection of sales tax on sales of checks and related items to depositors.
The Taxpayer has asked that the Department allow them to collect and remit sales tax on sales of checks and related items on behalf of financial institutions.
RULING
Code of Virginia §58.1-612 and VR 630-10-29.1 (copies enclosed) set forth the "nexus" requirements which give the Commonwealth the authority to require dealers to register for collection and remittance of the sales tax. Any financial institution selling at retail, or offering for sale at retail, tangible personal property in Virginia would be considered a dealer. Notwithstanding the above, and in order to reduce the administrative burden on all parties involved, I will agree to allow the Taxpayer to collect and remit the sales tax on behalf of financial institutions who make sales of checks and related items to their depositors.
In certain situations, the department has entered into sales and use tax collection agreements allowing a third party to collect and remit sales tax on behalf of dealers selling their products. I understand that you, other industry representatives, and members of my staff are currently developing such an agreement for use by other check printers. This agreement may be used by any check printer wishing to collect and remit sales tax on behalf of financial institutions. Interested parties may contact the department to obtain a copy of the agreement or to obtain additional information concerning this matter.
It should be noted that this policy change does not alter the fact that financial institutions are dealers with respect to sales of checks or other types of tangible personal property. Therefore, financial institutions are still required to collect and remit sales tax on any sales of tangible personal property for which sales tax is not being collected through a sales tax collection agreement with a check printer.
The department will be working with various industry representatives and with organizations representing financial institutions in the coming weeks to announce and implement this administrative change. If you have any questions concerning this matter, or wish to obtain a sales and use tax collection agreement, please contact***********.
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- Sincerely,
Danny M. Payne
Tax Commissioner
- Sincerely,
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Rulings of the Tax Commissioner