95-62 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Application of sales and use taxes; Chimney sweep and repair business

Topic

Taxability of Persons and Transactions

Date Issued

03-29-1995

March 29, 1995

Re: Ruling Request: Retail Sales and Use Tax

Dear***************

This will respond to your letter of November 22, 1994 seeking a ruling on the application of the sales and use tax for the ********** (the "Taxpayer" ) .

FACTS

The Taxpayer operates a chimney sweep and repair business. Prior to a recent audit, the Taxpayer had been treating itself only as a retailer. As a result of the audit, however, the auditor found the Taxpayer to be engaged as a using and consuming contractor and a retailer. While the Taxpayer is now aware that Virginia Regulation (VR) 630-10-27 (B) is applicable to its operation, the Taxpayer feels that the different procedures for applying the tax will cause confusion among its employees and tax reporting problems for its bookkeeper. Since it makes relatively few retail sales, the Taxpayer would rather not collect the sales tax on retail sales. Instead, the Taxpayer seeks permission to pay the tax only on the cost price of goods purchased whether for use or consumption or for resale.

RULING

Code of Virginia §58.1-602 grants the department only limited authority to permit dealers to pay
tax on the cost price of goods that will be resold. This authority is provided only when:

- ...because of the operation of the business, or its very nature, or the lack of a place of business in which to display a certificate of registration, or the lack of adequate records, or because such persons are minors or transients, or because such persons are engaged in essentially service businesses, or for any other reason there is likelihood that the Commonwealth will lose tax funds due to the difficulty of policing such business operations.

In this case, the Taxpayer has a place of business, maintains necessary records, and engages in retail sales on a regular basis. The Taxpayer's retail sales are also not so inconsequential as to consider the Taxpayer engaged in an essentially service business requiring the payment of the sales tax to vendors on purchases for resale.

Additionally, the statute shows the General Assembly's intent that dealers actually collect the tax from their customers except in the most extraordinary of situations. Although I am sympathetic to the Taxpayer's situation, it is in reality quite similar to many small businesses which make sales of both nontaxable services and taxable goods. The department has not granted permission to these firms in the past to forego the collection of tax from customers and to do so here would put your firm at a competitive advantage.

I regret that I cannot honor your request. If you have any questions regarding this letter, please contact****************.

- - - - Sincerely,
        
        Danny M. Payne
        Tax Commissioner

OTP/8980R

Rulings of the Tax Commissioner