Tax Type
Retail Sales and Use Tax
Description
Credit for taxes paid to another state; Erroneous payment
Topic
Credits
Date Issued
09-30-1996
September 30, 1996
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear**************
This will reply to your letter in which you seek correction of a retail sales and use tax assessment for the period October 1991 through March 1994 on behalf of your client,*******(the Taxpayer). I apologize for the delay in responding to you.
FACTS
The taxpayer is an out-of-state electrical contractor that was audited and assessed use tax on various purchases and rentals of tangible personal property used in the performance of contract work in Virginia. The Taxpayer maintains that sales tax was paid to other states on a large number of the items in the audit and therefore, the Taxpayer would be entitled to a credit against the audit liability for the taxes paid to other states.
DETERMINATION
Virginia Regulation (VR) 630-10-29 states that "[a]ny person who purchases tangible personal property in another state and who has paid a sales or use tax to such state and/or its political subdivision on the property, is granted a credit against the use tax imposed by Virginia on its use within this state for the amount of tax paid in the state of purchase." This same section also states that "[t]his credit does not apply to tax erroneously charged or incorrectly paid to another state." The amount of credit allowed is equal to the tax paid to the other state or political subdivision but is limited to the amount of Virginia use tax imposed on the property.
The Taxpayer rented or purchased tangible personal property from vendors located in other states. The vendors collected sales tax from the Taxpayer and remitted the tax to their home states. The auditor states in the audit comments that only those items that were delivered to the Taxpayer in Virginia were held taxable in the audit. If the Taxpayer took possession of the items in another state and that state's sales tax was paid, the purchases were not listed. VR 630-10-51 (copy enclosed) states that "[t]he tax does not apply to sales of tangible personal property in interstate or foreign commerce." Accordingly, tangible personal property purchased from a vendor located in another state and delivered into Virginia is exempt from the seller's state sales tax when the property is delivered in the seller's vehicle or by a third party (other than the purchaser or lessee). Since there was no taxable use of the property made by the Taxpayer in the vendor's state, payment of that state's sales tax is erroneous. In such cases, the Virginia credit for taxes paid to other states would not apply.
I understand that a member of my staff discussed the application of the credit in a telephone conversation with you and that refund claims have been made with the vendors who incorrectly collected and remitted another state's sales tax. While I am unable to grant credits against the audit liability for erroneous payments of sales tax to other states, I will allow the Taxpayer sixty days to provide documentation to the department of any items in the audit which it feels are not taxable in Virginia. Documentation may consist of invoices showing an out-of-state shipping address, bills of lading, delivery receipts, etc.
Due to the length of time taken to respond to you, I will agree to waive interest accrued on the Taxpayer's assessment since the date of your letter (August 17, 1994) if the balance of the assessment is paid within thirty days after the review of the above referenced documentation is completed. Please contact the department's********** Audit Unit at**** to set up an appointment to review the requested documentation. You may contact **** in the Office of Tax Policy at ***** if you have any questions concerning my determination.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8798S
Rulings of the Tax Commissioner