Tax Type
Retail Sales and Use Tax
Description
Interstate transactions; Cemetery monuments constructively received in Virginia
Topic
Taxability of Persons and Transactions
Date Issued
08-18-1997
August 18, 1997
Re: Request for Ruling: Retail Sales and Use Tax
Dear****************
This is in reply to your letter of July 10, 1997, in which you request a ruling on the sale of cemetery markers and monuments in Virginia. Your company,*********** (the "Taxpayer") is contemplating the establishment of a retail office in Virginia, as well as a production plant.
FACTS
The Taxpayer receives monuments and markers which have been shaped, polished and finished, and are ready for engraving. The Taxpayer engraves all lettering, as well as the carving of floral designs and etchings. Upon completion of the engraving, the Taxpayer transports all monuments and markers to the cemetery indicated by the customer. The Taxpayer installs the monuments and/or markers at the proper grave site. The Taxpayer questions the application of the Virginia retail sales and use tax to the foregoing transactions, as well as the use of certain supplies in the engraving of the monuments or markers.
RULING
Generally
Code of Virginia § 58.1-602 provides that a "retail sale" or a "sale at retail" shall mean "... a sale to any person for any purpose other than for resale in the form of tangible personal property or services taxable under this chapter ...." This same section further provides that a "sale" shall mean "any transfer of title or possession, or both ... in any manner or by any means whatsoever, of tangible personal property and any rendition of a taxable service for a consideration. and includes the fabrication of tangible personal property ....
In conjunction with the foregoing, Title 23 of the Virginia Administrative Code (VAC) 10-210-560, copy enclosed, provides further interpretation and states that fabrication is an operation which changes the form or state of tangible personal property. It further states that a person regularly engaged in the fabrication of tangible personal property for sale at retail must collect and pay the tax on the sales price of the property.
Additionally, VAC 10-210-4040, copy enclosed, also explains the department's policy with regard to taxable services and states that "charges for services generally are exempt from the retail sales and use tax. However, services provided in connection with sales of tangible personal property are taxable."
Retail Sales
With the foregoing in mind, the monuments and markers are received by the Taxpayer ready for engraving. After consultation with the customer, the Taxpayer will engrave the monument or marker with lettering, floral designs or etchings utilizing carborundum under air pressure, and/or stencils. Upon completion and acceptance from the customer, the monument is transported to the cemetery of customer choice and set in place. The Taxpayer states that the monument is not attached to the earth and does not become real property.
Based on the information presented, the Taxpayer is not a manufacturer, but rather a retailer selling tangible personal property. All services in connection with the sale of tangible personal property become a part of the retail cost of the property to be sold with sales taxes computed on the total retail price. If charges are made for the delivery of the monument, and the installation, such charges would not be subject to the tax if such charges were separately stated on the invoice to the customer. Please note, however, that if the sale of a monument and the charges for delivery and installation are not separately stated, but rather invoiced on a lump sum basis, the sales tax will apply to the total charge (reference Code of Virginia § 58.1-609.5(2) & (3), copy enclosed).
Materials used in engraving. etc.
With respect to the use of the carborundum and the stencils by the Taxpayer in providing the engraving, carving or etching services, such materials are used by the Taxpayer and not resold to the customer. As a result, the cost of such materials are taxable to the Taxpayer. I have enclosed a copy of a previous ruling P.D. 94--261 (08/18/94) which further details the department's longstanding position.
Sales delivered outside Virginia
The Taxpayer also seeks direction in instances where a resident of another state would come to the Taxpayer's Virginia location and purchase a memorial which would be installed by the Taxpayer in a cemetery outside of Virginia. VAC 10-210-780, copy enclosed, addresses interstate and foreign commerce and states, in part, the following:
-
- The tax does not apply to sales of tangible personal property in interstate or foreign commerce. A sale in interstate or foreign commerce occurs only when title or possession to the property being sold passes to the purchaser outside of Virginia and no use of the property is made within Virginia. (Emphasis added).
In order for the sale in question to qualify for the interstate commerce exemption, delivery of the property must be made to the customer (purchaser) outside Virginia. As understood by this office, the sale in question is made to the customer at the Virginia location. While the customer does not take actual possession of the property, the customer is deemed to have taken constructive possession of the property in Virginia when the customer directs the Taxpayer to deliver the property to another party, in this instance, the cemetery, thus rendering the transaction taxable for Virginia tax purposes. Based on the strict construction of the interstate and foreign commerce exemption, there would be no basis for exempting the hypothetical sale in question as interstate commerce. I have enclosed a copy of a previous ruling P.D. 89-150 (04/28/89), which reiterates the department's longstanding policy.
Additionally, I must note that the retail sales and use tax rate for Virginia is a total of 4.5% rather than the 6% indicated in the Taxpayer's letter.
I trust that the copies of prior department rulings and the cited statutes and regulations have addressed your concerns. If you should have any questions regarding this matter, please contact ********* of the department's Office of Tax Policy at ***********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12737Q
Rulings of the Tax Commissioner