Tax Type
Retail Sales and Use Tax
Description
Packaging; Purchases of plastic stretch wrap exempt
Topic
Taxability of Persons and Transactions
Date Issued
07-28-1997
July 28, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear***********
This is in response to your letter of June 13, 1997, in which you seek correction of a sales and use tax assessment issued to ****** (the "Taxpayer") for the period February 1994 through December 1996.
FACTS
The Taxpayer is a wholesale distributor whose sole customer is a major restaurant chain. The only contested transaction involves the Taxpayer's purchase of plastic stretch wrap. You indicate that this item is used at your distribution centers to package cases of product which are loaded on pallets prior to delivery. For example, the Taxpayer will fill an order for a specific customer store. The order is loaded onto pallets and brought to the warehouse loading dock. Prior to loading, the pallet (loaded with the Taxpayer's products) is wrapped with the stretch wrap and delivered to the customer with the products being sold.
DETERMINATION
The application of the tax to packaging materials is set out in Title 23 of the Virginia Administrative Code, Section 10-210-400. This regulation distinguishes exempt packaging materials (such as sacks, cans, and boxes) from taxable transportation devices (such as pallets, strapping and similar materials). The regulation defines "transportation devices" to mean "items which are used to transport and protect products for sale and to restrain product movement in a single plane of direction." The regulation further provides that "transportation devices ... may not be purchased tax exempt unless purchased for resale." (Emphasis added.)
The stretch wrap in this case is marketed with the Taxpayer's products and becomes the property of the customer. I therefore agree that this item may be purchased by the Taxpayer exempt of the tax for resale. This same conclusion was reached in prior determinations by the Tax Commissioner. See, for example, the enclosed Public Document 93-3 (1/6/93) which addresses plastic wrap used to package rented glassware packed into returnable containers. In that case, it was found that while the returnable containers were taxable at the time of purchase, the plastic wrap represented an exempt packaging material.
Accordingly, the assessment will be revised to remove charges for the Taxpayer's purchase of stretch wrap. A revised assessment will be issued to the Taxpayer as soon as practicable.
Please contact ***************in my Office of Tax Policy at *******if you have any questions regarding this letter.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12680I
Rulings of the Tax Commissioner