Tax Type
Retail Sales and Use Tax
Description
Services; miscellaneous service enterprises; Packing and warehousing
Topic
Taxability of Persons and Transactions
Date Issued
05-09-1996
May 9, 1996
Re: § 58.1-1821 Application: Retail Sales & Use Tax
Dear***************
This will reply to your letter of June 27, 1995 in which you seek a correction of the department's assessment issued to ***** (the "Taxpayer"), for the period January 1989 through December 1994.
FACTS
The Taxpayer operates as a mover of household goods while providing packing and warehousing services. The department's audit assessed tax on the purchase and use of packaging materials. The Taxpayer states that when operations were started, an attempt was made to register with the department, but was told that moving businesses were exempt from the tax. The Taxpayer contests the application of tax for a six year audit period on packaging materials contending that other moving businesses enjoy an exemption. The Taxpayer requests that the assessment be waived.
I note that the Taxpayer has never been issued a certificate of convenience and necessity by the State Corporation Commission.
DETERMINATION
Code of Virginia § 58.1-609.3(3) provides an exemption from the sales and use tax for "tangible personal property sold or leased to a public service corporation engaged in business as a common carrier of property or passengers by motor vehicle or railways, for use or consumption by such common carrier directly in the rendition of its public service." Virginia Regulation (VR) 630-10-24.3, copy enclosed, further interprets the statute and stipulates that a common carrier must be authorized to operate under a certificate of convenience and necessity issued by the State Corporation Commission in order to qualify for the exemption. Because the Taxpayer is not authorized to operate under a certificate of convenience and necessity, it is not qualified to make purchases exempt of the tax.
Instead, the Taxpayer's operations are controlled by VR 630-10-42, copy enclosed, which provides that furniture and storage warehousemen are primarily involved in the business of moving, storing, packing, and delivering tangible personal property belonging to other people. The regulation specifically states that such actions are services and not subject to the tax on the charge for such services. However, the tax does apply to "crating, boxing, packing materials, etc., purchased by warehousemen for use in the performance of such services...." Accordingly, I find that the audit properly applied tax to all purchases in connection with such activities.
With regard to your concern that other companies are able to purchase such materials exempt of the tax, a company may qualify as a common carrier and operate in accordance with the Code of Virginia and the defining regulations if operating under a certificate of convenience and necessity. This is not the case for this Taxpayer.
The Taxpayer is advised that effective January 1, 1995, due to deregulation of the motor carrier industry on the federal and state levels, the Interstate Commerce Commission (ICC) and State Corporation Commission (SCC) have ceased issuing certificates of convenience and necessity. It is the department's understanding, however, that the ICC still recognizes a distinction between common and contract carriers by issuing common carrier or contract carrier authority based on insurance requirements. This action has considerably impacted the distinction between common and contract carriers and the application of Virginia's exemption; however, the department is bound by the existing statute which clearly limits the exemption to common carriers rather than contract carriers.
Statute of Limitations
In addressing the statute of limitations for assessing sales and use tax, Code of Virginia § 58.1-634 provides that the sales and use tax "shall be assessed within three years from the date on which such taxes became due and payable...[however, for] failure to file a return, the taxes may be assessed...at any time within six years from such date." Once established that a taxpayer fails to file a return for any month in which a return is due, the audit period may be extended to six years. Accordingly, I find that the auditor was justified in extending the assessment period to six years.
Based on the foregoing, I find no basis for adjusting the department's audit. A payment copy of the assessment, with interest accrued to date, will shortly be mailed to the Taxpayer, and must be paid within 30 days to prevent the accrual of additional interest. If you have any additional questions concerning this matter, please contact**of the department's Office of Tax Policy, or the department's ******District Office.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9979Q
Rulings of the Tax Commissioner