95-73 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Transportation equipment; Common carrier; Bus maintenance parts

Topic

Taxability of Persons and Transactions

Date Issued

04-05-1995

April 5, 1995

Re: §58.1-1821 Application: Retail Sales and Use Tax

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

This will reply to your letter of February 20, 1995 in which you seek correction of sales and use tax assessed to your client, **********(the "Taxpayer"), for the period July 1990 through October 1993.

FACTS

The Taxpayer is engaged in the rental, leasing and servicing of trucks and other motor vehicles. The Taxpayer offers a product maintenance program through which it sells maintenance! contracts which provide for both repair or replacement parts and repair labor to its customers. As a result of the department's audit, the Taxpayer protests the assessment of tax upon maintenance contracts involving the provision of tangible personal property sold to one customer which operates public transit systems (buses).

The Taxpayer argues that its customer operates as a common carrier and therefore the sales of maintenance contracts are exempt as sales to a common carrier for use in the rendition of its public service based on Code of Virginia §58.1-609.3(3). The Taxpayer provides certain documentation to support its argument.

DETERMINATION

Code of Virginia §58.1-609.3(3) provides an exemption for "...tangible personal property sold or leased to a public service corporation engaged in business as a common carrier of property or passengers by motor vehicle or railway, for use or consumption by such common carrier directly in the rendition of its public service." Virginia Regulation (VR) 630-10-24.3 further interprets the statute and requires that the common carrier must be authorized to operate under a certificate of public convenience and necessity issued by the State Corporation Commission (SCC) or the Interstate Commerce Commission (ICC). However, the regulation only applies to common carriers of property by motor vehicle.

The Taxpayer concedes that the regulation specifically applies to common carriers of property but asserts that the department has extended the exemption to common carriers of passengers in P.D. 87-23 (2/13/87). The Tax Commissioner in that ruling denied the exemption because the taxpayer, a school bus operator, did not possess the proper authorization from the SCC or the ICC to operate as a common carrier.

In this case, the Taxpayer has provided certificates of public convenience and necessity issued to its customer by the ICC and the Washington Metropolitan Area Transit Commission (WMATC). WMATC was created by federal law and is authorized to regulate the transportation for hire by carriers of passengers within the Washington Metropolitan area. Virginia, under the Washington Metropolitan Area Transit Regulation Compact, along with Maryland and the District of Columbia, relinquished its authority to regulate transportation in certain localities surrounding the Washington, D.C. metropolitan area. Fairfax County, as one of the surrounding localities, falls under the jurisdiction of WMATC and therefore carrier operations in that locality are regulated by WMATC. Prince William County, however, does not fall under the jurisdiction of WMATC and therefore the certificate relating to the regulation of carrier operations in that locality was issued by the ICC.

Based upon verification of the certificates presented and P.D. 87-23, the Taxpayer's customer is deemed a common carrier regarding its operations in both localities and as such the Taxpayer's sales of maintenance contracts, which include the provision of tangible personal property, qualify for the exemption provided under Code of Virginia § 58.1-609.3(3).

Accordingly, the audit assessment relating to the issues discussed in this appeal will be abated. If you have additional questions, please do not hesitate to contact********.

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

OTP/9385J

Rulings of the Tax Commissioner