Tax Type
Retail Sales and Use Tax
Description
Nonproit organizations, private schools, and churches; School bus service contract.
Topic
Taxability of Persons and Transactions
Date Issued
10-17-1997
October 17, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear***********
This concerns the sales and use tax assessment issued to ******(the "Taxpayer") for the period July 1993 through June 1996. An April 29, 1997, determination to the Taxpayer found that tangible personal property purchased in connection with certain school bus service contracts was properly assessed. You met with the department on July 23, 1997, and asked that the determination be reviewed. As you know, the original assessment was revised to remove certain purchases made in connection with parts and labor maintenance contracts.
We agree that the contested transactions in this case are controlled by Code of Virginia § 58.1-609.3(3). In pertinent part, the statute provides an exemption from the retail sales and use tax for:
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- 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 railway, for use or consumption by such common carrier directly in the rendition of its public service.
The department discussed the issues which are central to this case with the Department of Motor Vehicles, Motor Vehicle Credentials Services (MVCS). It is MVCS that is charged with the supervision, regulation and control of all motor vehicle common carriers and restricted common carriers operating in the Commonwealth. MVCS confirms the department's understanding of the regulatory requirements imposed on motor vehicle passenger carriers and the exclusions from those requirements. As discussed in my previous determination to the Taxpayer, Code of Virginia§ 46.2-2000.1 excludes from MVCS regulation those motor vehicles used solely in transporting school children and teachers. Such school bus operators are not bound by MVCS regulation, but rather by the terms and conditions set out in the carriers' contracts with its school customers.
Also, a carrier who provides school bus transportation (and no other transportation services) would have no obligation with MVCS. For example, such carrier is not required to apply for and receive a certificate of convenience and necessity and is not required to comply with MVCS insurance requirements. The school bus carrier would also have no obligation to file with MVCS tariffs showing rates, fares and charges. Similarly, a certificated motor carrier is also not subject to these MVCS regulatory requirements for school bus transportation provided under contract with schools. In this regard, the carrier's school bus transportation is outside of the carrier's public service.
The Taxpayer provides public service transportation as a certificated common carrier in connection with some of its business activities. It does not provide public service transportation in connection with the contested transactions. The contested transactions are governed by the requirements set out in the contracts between the Taxpayer and its school customers, but are not regulated by MVCS requirements.
I am also not swayed in this case by the statutory definition of a "restricted common carrier by motor vehicle" set out in Code of Virginia § 46.2-2000. Again, the issue at hand is not ****status as a common carrier. The issue is whether or not the contested purchases are used in the Taxpayer's rendition of its public service. I continue to find that they are not. The exemption in Code of Virginia § 58.1-609.3(3) is therefore not applicable.
Accordingly, l again find that the contested purchases are taxable and are correctly assessed. A copy of the bill, with interest accrued to date, will be sent to the Taxpayer as soon as practicable. No additional interest will accrue provided the outstanding balance is paid within 30 days. In the meantime, please call ***** in the Department's Office of Tax Policy at ***** if you have any questions on this letter.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12805I
Rulings of the Tax Commissioner