Tax Type
Retail Sales and Use Tax
Description
Manufacturing, Industrial control panels
Topic
Taxability of Persons and Transactions
Date Issued
08-09-1995
August 9, 1995
Re: Retail Sales and Use Tax
Dear***************:
This will respond to your May 25, 1995 letter seeking clarification on the application of the retail sales and use tax on industrial control panels produced and sold by*******(the "client").
FACTS
Your client is a producer of industrial control panels. These control panels are used as replacement components for large industrial manufacturing machinery and as sub-assemblies for companies producing original industrial machinery for use in the manufacturing process. You request a ruling as to whether your client is required to collect sales tax on control panels sold in these situations.
RULING
Exemption Certificates: Generally, the sale of tangible personal property at retail is subject to the tax unless the purchaser certifies to the seller, using a valid exemption certificate, that the property will be used for some exempt purpose under Virginia tax law (see Virginia Regulation (VR) 63-10-20, copy enclosed).
For example, replacement control panels for industrial manufacturing machinery may be sold exempt of the tax provided the purchaser furnishes your client with a completed ST-11 exemption certificate (copy enclosed) by marking the second box to indicate that the panel is a replacement part of machinery "used directly" in the manufacturing process. Also, control panels which are purchased only as sub-assemblies for industrial manufacturing machinery produced by another industrial manufacturer may be sold exempt of the tax, provided the purchasing manufacturer furnishes your client with a completed ST-11 exemption certificate or ST-10 resale exemption certificate (copy enclosed).
Dealer's Registration: Code of Virginia § 58.1-602 defines a "retail sale" as "a sale to any person for any purpose other than for resale in the form of tangible personal property or services taxable under this chapter...". Accordingly, the sale of replacement panels to ultimate consumers, such as in the first example shown above, is a retail sale.
As your client is engaged in making retail sales, your client is deemed a dealer under VR 630-10-29.1(a), copy enclosed, and is generally subject to the dealer's registration requirements set out in VR 630-10-21 (copy enclosed). However, as it appears that your client's sales will be entirely exempt, your client need not register for the collection and remittance of the retail sales tax at this time but should register with the Department of Taxation for consumer use tax purposes (see VR 63-10-109, copy enclosed). A combined registration application, Form R-1, is enclosed for your client to complete and submit to the department. If your client engages in taxable sales at some future time, however, it will also be necessary at such future time for your client to register with the department for the collection and remittance of the retail sales tax.
If you have any questions concerning this matter, please contact***********at****************.
Sincerely,
Danny Payne
Tax Commissioner
Rulings of the Tax Commissioner