Tax Type
Tire Tax
Description
Motor Vehicle Carriers
Topic
Collection of Tax
Date Issued
09-20-1996
September 20, 1996
Re: § 58.1-1821 Application: Virginia Tire Tax
Dear**********
This is in response to your letter of May 6, 1996 in which you seek correction of a tire tax assessment issued to ********* (the "Taxpayer") for the period October 1992 through June 1995.
FACTS
The Taxpayer operates as a motor vehicle carrier of property. During the audit period, the Taxpayer held certificates of convenience and necessity by the Interstate Commerce Commission (ICC) to operate as a common carrier and was also authorized by the ICC to operate as a contract carrier of property.
The assessed tires were purchased by the Taxpayer from two vendors, both of whom are headquartered outside of Virginia. I understand, however, that both vendors are registered with the department for the collection of the tax and that the tires were delivered by the vendors to the Taxpayer's location in Virginia.
I further understand that some of the tires are for installation on newly purchased equipment. For example, the Taxpayer purchases trailers without tires and then installs tires purchased from its tire vendors. In other instances, the tires are for use as replacements.
The Taxpayer contests the assessment on the grounds that the tires were purchased from vendors outside of Virginia. You also contend that the Taxpayer, as a common carrier, enjoys an exemption from the tax.
DETERMINATION
The tire tax is imposed under Code of Virginia § 58.1-641 "upon every retailer of tires in the Commonwealth...." A "retailer of tires" is defined in § 58.1-640 to mean "any person engaged in the business of making retail sales of tires ... within this Commonwealth." Further, § 58.1-644 indicates that the provisions of the Retail Sales and Use Tax Act will apply to the tire tax, "except that replacement truck tires shall be subject to the [tire] tax...." (Emphasis added)
With these provisions in mind, I find first that the Taxpayer's tire vendors made retail sales of tires in Virginia. In Code of Virginia § 58.1-602, the term "retail sale" is defined as "a sale to any person for any purpose other than for resale...." That same section defines "retailer" as "every person engaged in the business of making sales at retail, or for distribution, use, consumption, or storage to be used or consumed in this Commonwealth." Further, § 58.1-612 imposes collection requirements on those businesses which import tangible personal property into Virginia "for sale at retail for use, consumption, or distribution ... in this Commonwealth."
Notwithstanding the above, Code of Virginia § 58.1-609.3(3) provides an exemption from the sales and use tax for tangible personal property sold to:
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- 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 department has historically applied this exemption only to property used directly to provide exempt common carrier activities. Property used in an activity outside the common carrier authority (e.g., for use in contract carriage) is taxable. Property which is used in both exempt and taxable operations is prorated.
The exemptions from the retail sales and use tax are also applicable to the tire tax, except that replacement truck tires are subject to the tire tax. A "replacement truck tire" is defined in Virginia Regulation 630-27-640 as "a new tire designed by industry standards for use on a truck which is sold to replace a tire attached to or used as a spare on a truck."
Accordingly, and because some of the tires were purchased for installation on newly purchased equipment, and not purchased as replacement truck tires, I agree the assessment is overstated. The assessment for tires used on newly purchased equipment will be removed from the assessment under authority of § 58.1-609.3(3). This revision, however, will reflect a proration based on the Taxpayer's exempt common carrier activities.
The audit will be returned to the auditor so that the assessment can be revised according to this determination. The auditor will contact you as soon as possible for any additional information necessary to make these revisions.
Please contact ***** in my Office of Tax Policy at ****** if you have any questions regarding this determination.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11574I
Rulings of the Tax Commissioner