Tax Type
Retail Sales and Use Tax
Description
Services; Repair and installation; Motor vehicle paint and supply purchases; Tax-exempt customers
Topic
Taxability of Persons and Transactions
Date Issued
11-21-1996
November 21, 1996
Re: §8.1-1821 Application: Retail Sales and Use Tax
Dear*************
This is in response to your letter of October 14, 1996, in which you seek correction of a sales and use tax assessment issued to****************(the "Taxpayer").
FACTS
The Taxpayer operates a facility that provides truck repairs including body repairs and automotive painting. An assessment was issued for the period April 1995 through June 1996. This assessment is predominantly for untaxed purchases of automotive paint and paint supplies. To a lesser extent, the assessment also reflects untaxed purchases of shop supplies used by the Taxpayer.
The Taxpayer points out that it does not stock or carry an inventory of paint and that paint is not purchased for general shop use. Rather, paint is purchased for a specific customer and only in the amount needed for that customer. Further, you indicate that the system for ordering paint is totally controlled by computer. I also understand that many of the Taxpayer's customers are tax exempt organizations.
DETERMINATION
Paint and Paint Supplies
Code of Virginia § 58.1-604 imposes the tax on "the cost price of each item or article of tangible personal property used or consumed in this Commonwealth." Further, § 58.1-609.5(1) indicates that the tax does not apply to the sale of "professional, insurance, or personal service transactions...." It is well established that persons engaged in providing these tax exempt services are considered to be the users and consumers of the tangible personal property which they use to provide those services.
The application of the tax to automotive painting is set out in Virginia Regulation 630-10-70. As the regulation indicates, motor vehicle painters are engaged in providing personal services the sales of which are not subject to the tax. The tax does apply, however, to purchases of the materials (including paint and paint supplies) used in this activity.
The Taxpayer's computerized system of ordering a specific quantity of paint for a specific customer may be different from the way traditional motor vehicle painters purchase their materials. At the same time, the nature of the Taxpayer's business is to provide customers with a personal service. Accordingly, I must find that the purchases of paint and paint supplies were properly assessed.
Further, the fact that many of the Taxpayer's customers are tax exempt organizations would have no bearing on purchases made by the Taxpayer. As discussed above, the Taxpayer provides a nontaxable service. In other words, no tax is charged to any customer for motor vehicle painting. It is the Taxpayer, however, who is responsible for paying the tax on its purchases of paint and paint supplies. An exemption that might be available to a tax exempt customer does not extend to purchases made by the Taxpayer.
Shop Supplies
The application of the tax to shop supplies is addressed in prior rulings issued by the Tax Commissioner. See, for example, the enclosed Public Document 87-275 (12123/87). As discussed in this ruling, automotive repair businesses are deemed to be the users or consumers of shop supplies. As such, the purchases of these supplies are taxable.
Summary
The sales and use tax laws noted above, as well as the longstanding policy of the department, do not permit me to make any revisions to the assessment. Accordingly, the assessment is found to be correct. An assessment, with interest accrued to date, will shortly be issued to the Taxpayer. No additional interest will accrue provided the assessment is paid within 30 days.
If you have other questions regarding this letter, please contact *********in my Office of Tax Policy at*****************
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/1 1 7431
Rulings of the Tax Commissioner