Tax Type
Retail Sales and Use Tax
Description
Services; Cleaning and laundry; Linen services
Topic
Taxability of Persons and Transactions
Date Issued
10-24-1995
October 24, 1995
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear**************:
This will reply to your letter of June 16, 1995 in which you seek relief of tax and interest assessed to your client, ************* (the "Taxpayer"), as the result of a sales and use tax audit for the period of January 1992 through March 1995.
FACTS
The Taxpayer is a Virginia stock corporation in the business of providing linen service to a private nursing home. The Taxpayer is solely under contract with the nursing home to provide clean linens for a monthly fee. The Taxpayer was audited and assessed sales and use tax on the monthly fee for the rental of linens as provided in Virginia Regulation (VR) 630-10-58 (copy enclosed). It is the Taxpayer's contention that they are merely providing a service to the nursing home and the linens are incidental to the provision of such service; therefore; the transaction is exempt as provided in Code of Virginia § 58.1-609.5(1) and VR 630-10-97.1.
DETERMINATION
Code of Virginia § 58.1-609.5(1) provides a sales and use tax exemption for "professional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made...".
VR 630-10-97.1 (copy enclosed) which interprets the above statutory exemption explains that for purposes of distinguishing whether a particular transaction which involves both the rendering of a service and the provision of tangible personal property constitutes an exempt service or a taxable retail sale, the "true object" of the transaction must be examined. If the object of the transaction is to secure a service and the tangible personal property which is transferred to the customer is not critical to the transaction, then the transaction may constitute an exempt service. However, if the object of the transaction is to secure the property which it produces, then the entire charge is taxable.
Based on the circumstances in the instant case, the true object of the transaction is the furnishing of linens to the nursing home. The provision of the laundering service without the linens would serve no purpose to the Taxpayer's customer. Therefore, I have no alternative but to determine that the "true object" of the transaction is the provision of tangible personal property.
The department's position is further supported by VR 630-10-58 which sets forth the department's policy with respect to persons engaged in the linen supply business. This regulation states, in part, "a person engaged in the business of maintaining and preparing textile products for rental or lease is a lessor of tangible personal property and must collect and pay the tax on gross rental receipts."
Based on all of the foregoing, I find no basis for revising the audit. If you should have any further questions, please feel free to contact*********, Office of Tax Policy, at*************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9880K
Rulings of the Tax Commissioner