Tax Type
Retail Sales and Use Tax
Description
Application of sales and use taxes; Out-of-state vendors.
Topic
Taxability of Persons and Transactions
Date Issued
10-03-1997
October 3, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear******************
This is in reply to your letter in which you seek correction of sales and use tax assessed to **************** ("Taxpayer") for the period July 1992 through September 1996. I apologize for the delay in responding to your letter.
FACTS
The taxpayer is a ***** corporation. The taxpayer makes and sells large specialty signs, the type which are typically attached to commercial buildings displaying the name and logo of the company doing business there.
The taxpayer hires independent contractors to install the signs it sells. Between July 1992 and October 1995, on nine occasions, the taxpayer hired independent contractors to install signs in Virginia. The taxpayer delivered some or all these nine signs to its Virginia customers. The taxpayer provided blueprints, the location of installation, and an install-by date to the independent contractors performing installation. The taxpayer billed its customers for materials and installation labor and expenses. Independent contractors billed the taxpayer for installation work performed.
The taxpayer did not collect use tax on the signs it sold and delivered in Virginia. As a result, the taxpayer was assessed use tax on materials separately stated on its invoices and was involuntarily registered as an out-of-state dealer.
The taxpayer contests the assessment and involuntary registration claiming it lacks nexus in Virginia for it to be assessed with a use tax.
DETERMINATION
Under Code of Virginia § 58.1-612 (copy enclosed), the retail sales and use tax is collectible from all persons who are dealers. A dealer is defined in that section and includes every person who "sells at retail . . . or who has in his possession for sale at retail, or for use, consumption, or distribution, or for storage to be used or consumed in this Commonwealth, tangible personal property." The taxpayer clearly qualifies as a "dealer" § 58.1-612.
The taxpayer must also have sufficient activity within Virginia as set out in Code of Virginia § 58.1-612(C) before it can be assessed with a use tax. The facts presented indicate that sufficient nexus does not exist with Virginia. In this case, the taxpayer maintains no office, warehouse or other place of business in Virginia. The taxpayer does not advertise in Virginia nor does it solicit business in Virginia through employees, independent contractors, agents, or other representatives. Sales efforts take place in **** .
The taxpayer did deliver purchased signs directly to customers in Virginia. At most, nine signs were delivered over a period of three years. However, occasional deliveries made by an out-of-state merchant into Virginia do not confer nexus subjecting a merchant to assessments of use tax. Under Virginia law, nexus is deemed to exist if a dealer makes more than twelve deliveries of its goods during a calendar year directly to customers in Virginia by means other than common carrier. See Code of Virginia § 58.1-612(C)(4). The taxpayer did not meet this standard.
For these reasons, the assessment will be abated and your registration canceled.
If you have any questions, please call **** in the Office of Tax Policy at ******.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12526C
Rulings of the Tax Commissioner