Tax Type
Retail Sales and Use Tax
Description
Motor vehicles; Undercoating, paint protector, fabric protector services
Topic
Taxability of Persons and Transactions
Date Issued
11-04-1996
November 4, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear********
This will reply to your letter of July 30, 1996, in which you seek a ruling on the application of retail sales and use tax to sales of undercoating, paint protector, and fabric protector made in connection with the sale of motor vehicles by*********** (the "Taxpayer").
FACTS
The Taxpayer is an automobile dealership that offers customers the option of purchasing undercoating, paint protector, and fabric protector services at the time a new vehicle is purchased. The Taxpayer wishes to know if its current practice of including charges for undercoating, paint protector, and fabric protector in the sale price of motor vehicles subject to the 3% motor vehicle sales and use tax is correct. The Taxpayer also wishes to know if it should pay sales and use tax on the chemicals used to provide the undercoating, paint protector, and fabric protector services.
RULING
In Virginia, sales, leases, and rentals of motor vehicles are not subject to the retail sales and use tax provided they are subject to the 3% motor vehicle sales and use tax administered by the Department of Motor Vehicles. Code of Virginia § 58.1-2402 provides that the motor vehicle sales and use tax is imposed on the sale price of each motor vehicle sold in Virginia. "Sale price" is defined in Code of Virginia § 58.1-2401 as "the total price paid for a motor vehicle and all attachments thereon and accessories thereto ... exclusive of any federal manufacturer's excise tax, without any allowance or deduction for trade-ins or unpaid liens or encumbrances."
Virginia Regulation (VR) 630-10-67(C) (copy enclosed) provides that "[t]he retail sales and use tax does not apply to repair and replacement parts and accessories and oil and grease installed on a motor vehicle before or at the time of sale, lease or rental that are included in the sales price for measuring the motor vehicle sales and use tax ..." Based on the above, the Taxpayer should continue to operate in the current manner and include charges for undercoating, paint protector, and fabric protector services in the sale price of the motor vehicles it sells for purposes of computing the motor vehicle sales and use tax. The Taxpayer may purchase the chemicals used to provide the undercoating, fabric protector, and paint protector services exempt of the retail sales and use tax.
The Taxpayer indicates that it may sell these same services in a transaction separate from the sale of a motor vehicle. For example, a customer may be given a price for one or more of the services that is guaranteed for a certain period of time. If the customer decides at a later date to purchase the service(s), the motor vehicle sales and use tax would not apply to such charges. The exemption from retail sales and use tax provided in VR 630-10-67 would not be applicable in such cases. For retail sales and use tax purposes, the sale of the undercoating, paint protector, and fabric protector services in a transaction separate from the sale of a motor vehicle is deemed to be a nontaxable service. The Taxpayer is considered the consumer of the chemicals used to provide the services and should accrue use tax on the cost price of the chemicals.
The Taxpayer may purchase the chemicals exempt of the tax by issuing a resale exemption certificate, Form ST-10, to its suppliers. Any chemicals used to provide services that are not included in the sale price of motor vehicles would be subject to use tax. The Taxpayer should report the use tax on line 2 of the sales and use tax return, Form ST-9. I hope the foregoing has answered your questions but if you need further assistance, please contact ****** in the Office of Tax Policy at***************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11498S
Rulings of the Tax Commissioner