Tax Type
Retail Sales and Use Tax
Description
Transportation equipment; vehicles, vessels; Equipment used on towing vessels
Topic
Taxability of Persons and Transactions
Date Issued
05-15-1996
May 15, 1996
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear****************
This is in response to your letter of July 31, 1995. Your correspondence seeks correction of the sales and use tax assessment issued to ********(the Taxpayer). I apologize for the delay in responding to your concerns.
FACTS
The Taxpayer is a towing company which operates all of its tugs and barges in interstate commerce. An audit for the period April 1992 through March 1995 resulted in an assessment of tax on untaxed rentals and certain purchases of supplies and fixed assets.
The only contested issue is the tax assessed on towing lines, pushing cables, rope, shackles, wire rope clips, slings and deck lines used aboard vessels which do not ply the high seas, i.e., those vessels used primarily in the Chesapeake Bay and its tributaries. The Taxpayer maintains that these items are not supplies but are integral parts of the vessels and should qualify for the exemption provided under Code of Virginia § 58.1-609.3(4).
DETERMINATION
Code of Virginia § 58.1-609.3(4) provides an exemption from the retail sales and use tax for:
-
- Ships and vessels, or repairs and alterations thereof, used or to be used exclusively or principally in interstate or foreign commerce; fuel and supplies for use or consumption aboard ships or vessels plying the high seas, either in intercoastal trade between ports in the Commonwealth and ports in other states of the United States or its territories or possessions, or in foreign commerce between ports in the Commonwealth and ports in foreign countries, when delivered directly to such ships or vessels; or tangible personal property used directly in the building, conversion or repair of the ships or vessels covered by this subdivision.
Although the exemption for ships and vessels is broad, it does not cover all tangible personal property used in interstate or foreign commerce. The exemption covers repair parts and alterations to ships or vessels which are used exclusively or principally in interstate or foreign commerce, fuel and supplies used aboard vessels plying the high seas in interstate or foreign commerce, and tangible personal property used directly in the building, conversion or repair of such vessels. From the facts presented, it appears that none of the items at issue are repair or replacement parts of exempt vessels, nor are they used directly in the building, conversion or repair of such vessels. Further, the items are not used aboard vessels plying the high seas in interstate or foreign trade.
In previous rulings, the department has held that ropes and chains are not fixtures of a vessel but are considered supplies. See P. D.'s 93-120 (4/30/93) and 94--221 (7/14/94), copies enclosed. Based on the established policy set out in these rulings and the facts presented, there is no basis to conclude that towing supplies, although essential to the Taxpayer's towing operations, constitute integral parts or fixtures of the vessels.
Accordingly, the tax assessed on the items at issue is valid. To preclude further interest charges on the outstanding balance, payment of****should be sent to the attention of******at the department's Office of Tax Policy, P. O. Box 1880, Richmond, Virginia 23218-1880, within the next 30 days.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10989R
Rulings of the Tax Commissioner