Tax Type
Retail Sales and Use Tax
Description
Common carriers; Lighting fixtures, walkways
Topic
Taxability of Persons and Transactions
Date Issued
07-09-1996
July 9, 1996
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear**************
This will reply to your letter in which you seek correction of the retail sales and use tax audit of ******* (the "Taxpayer") for the period of April 1991 through April 1994.
FACTS
The Taxpayer is in the common carrier business transporting tangible personal property over highways. The Taxpayer was audited and assessed tax on walkways around their conveyor system and also overhead lighting fixtures incorporated into real property. I will address each of these issues below.
DETERMINATION
The first item of contention involves the purchase of walkways that are installed around the Taxpayer's conveyor system in order to allow employees access to the conveyor system. The conveyor system is used to sort customer packages for destination delivery and the loading and unloading of cargo. The Taxpayer contends that the walkways allow employees access to the exempt conveyor system, therefore, the walkway is likewise exempt.
Code of Virginia § 58.1-609.3(3) provides an exemption from the retail sales and use tax 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." The Virginia courts have consistently required strict construction of tax exemptions, i.e., where there is any doubt as to the application of an exemption, the doubt is resolved against the one claiming the exemption. See Golden Skillet Corporation v. Commonwealth, 214 Va.276, 199 S.E.2d 511 (1973).
Virginia Regulation (VR) 630-10-24.3 further interprets the statute and stipulates that tangible personal property for use or consumption directly in the rendition of its public service means only essential tangible personal property used immediately and principally by a common carrier of property to keep its motor vehicles operating on the road in the performance of its public service. The applicability of this exemption is totally dependent on the "use" rather than the "type" of property. While the department recognizes that the walkways are essential to provide employee access to the conveyor system, the walkways are not directly related to keeping the Taxpayers vehicles on the road and are not used directly in the public service function, as the conveyors are. The department takes the position that such walkways serve a convenient or facilitative function and are therefore taxable.
The second area in dispute involves the furnishing and installation of overhead lighting by a contractor. As provided in your letter, and the auditor comments, the lighting fixtures upon installation become affixed to real estate. This being the case, I will agree to remove the lighting contract from the audit findings.
The miscellaneous items set forth in your letter have already been removed from the audit findings. Once the audit has been adjusted to remove the lighting contract, a refund will be issued to the Taxpayer.
If you should have any question, please contact******** , Office of Tax Policy, at ********** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9693K
Rulings of the Tax Commissioner