Tax Type
Retail Sales and Use Tax
Description
Services-miscellaneous service enterprises; Services provided in and outside Virginia
Topic
Taxability of Persons and Transactions
Date Issued
04-03-1996
April 3, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear***************
This will respond to your letter of December 7, 1995, seeking clarification of the application of the retail sales and use tax to service transactions. Copies of all referenced materials are enclosed.
Services in Connection With the Sale of Tangible Personal Property
Generally, the retail sale of tangible personal property and any services which are part of the sale are subject to the retail sales and use tax. See definitions of "sale" and "sales price" set out in Code of Virginia § 58.1-602. The only services which are exempt from the tax when separately stated on the customer's invoice, even though part of the sale of tangible personal property, are set out in subsection's 2, 3, 4, and 6 of Code of Virginia § 58.1-609.5. For transportation or delivery charges, also see Virginia Regulation (VR) 630-10-107. For alterations, see VR 630-10-8.1. Effective January 1, 1996, only one-half of the total charge for parts and labor maintenance contracts are taxable, see subsection 9 of Code of Virginia § 58.1-609.5, Tax Bulletin 95-8, and VR 630-10-62.1.
Pure Service Transactions
Code of Virginia § 58.1-609.5(1) exempts from the retail sales and use tax professional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made, and services rendered by repairmen for which a separate charge is made. Also, see subsections 5, 7, and 8 of this statute for other exempt service transactions.
However, as set out in subsection A of VR 630-10-97.1, the retail sales and use tax applies to charges for the following services:
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- the fabrication of tangible personal property for consumers who furnish, either directly or indirectly, the materials used in fabrication (see VR 630-10-37);
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- meals prepared and sold at retail by restaurants, hotels, motels, clubs, caterers, cafes and others (see VR 630-10-64); and
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- any rooms, lodgings or accommodations furnished to transients by any hotel, motel, inn, tourist camp or cabin, camping grounds, club or any other similar place furnished for less than 90 continuous days (see VR 630-10-48).
Scenario Presented
In your scenario, you indicate that a person engages a service provider to perform a taxable service at two locations; one location is in Virginia and the other is outside Virginia. The charge for the taxable services performed at each location are separately stated on a sales invoice furnished the customer who makes payment directly to the service provider in Virginia. You ask whether the retail sales and use tax is due on the entire amount charged or just on the portion of the taxable services performed in Virginia. You also ask whether the retail sales and use tax applies if payment for all services were, instead, made to the service provider at a location outside of Virginia. This scenario does not entail services provided in connection with the taxable sale of tangible personal property. Rather, you are only interested in how the tax applies to those pure service transactions which are taxable in Virginia.
All retail sales of taxable services made in Virginia are subject to the retail sales and use tax. Other than services provided in connection with taxable sales of tangible personal property, the only services subject to taxation are those listed above in the Pure Service Transactions section of this ruling; i.e., fabrication, meals and lodging. Therefore, the focus of this ruling will be only on those service transactions.
VR 630-10-84(A) is applicable to this situation and sets out that the situs of sale is "the business location in Virginia that first takes the purchaser's order, either in person, by purchase order or by letter or telephone, regardless of the location of the merchandise [or taxable service] or the point of acceptance of the order or shipment." (Insert added.) Subsection C of this regulation also provides that:
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- An out-of-state dealer who has a place of business in Virginia is required to register as a dealer at that place. If the same dealer, at a place of business outside this state, receives orders from Virginia customers directly and not through a place of business in Virginia, he must also register as an out-of-state dealer.
Therefore, the general rule is that if the retail dealer (fabricator, caterer, restaurant, motel, hotel, etc.) is in Virginia or is an out-of-state dealer with a location in Virginia and takes the purchase order, the entire service transaction is taxable. Where the payment is made has no bearing on whether the transaction is taxable.
However, if some of the meals or lodgings are furnished to the customer entirely outside Virginia, and if those meals furnished outside Virginia are not delivered to the customer in Virginia for use or consumption in Virginia, only that part of the charge related to the services rendered in Virginia will be taxable, provided the portion of the charge relating to those services furnished to the customer outside of Virginia is separately stated on the invoice to the customer.
If fabrication services are furnished by a fabricator regardless of whether located within and/or outside Virginia, and the item fabricated is returned to the customer in Virginia, the entire amount charged for fabrication services is subject to the retail sales and use tax. However, if the fabricated item is not delivered to the customer in Virginia but is delivered to the customer outside of Virginia, and no use of the item will be made in Virginia, then the fabrication services are not subject to the tax.
If you have any questions about this ruling, please contact***** at*************
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/1673R
Rulings of the Tax Commissioner