Tax Type
Retail Sales and Use Tax
Description
Occasional sales; Construction equipment; Use tax liability of purchaser.
Topic
Taxability of Persons and Transactions
Date Issued
10-31-1997
October 31, 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 January 1994 through December 1996. I apologize for the delay in responding to your letter.
FACTS
The taxpayer is a construction company. The taxpayer was assessed use tax for untaxed purchases of fixed assets and expensed items. The taxpayer appeals the assessment of tax on numerous purchases claiming that sales tax was paid or was not applicable. To avoid the accrual of additional interest, the taxpayer paid the assessment in full.
Subsequent to the taxpayer's appeal, an invoice was forwarded to the department proving that tax was paid on a July 1995 purchase of Vicretex wallcovering. The amount of tax paid to the department for this purchase, along with applicable interest and penalty, will be refunded to the taxpayer.
DETERMINATION
Purchases from Vendors
The taxpayer identified seven vendors from whom purchases were made. In each case, the taxpayer does not dispute that the transaction was subject to tax. For some of these purchases, the taxpayer maintains that tax was collected and remitted to the Commonwealth. As to the other purchases, the taxpayer argues that sales tax was paid to another state and a credit is available against Virginia sales and use tax for the amount of tax paid.
I find no grounds for removing these purchases from the audit at this time. If the taxpayer can provide invoices proving that tax was paid, the department will refund the amount of tax paid, along with applicable penalty and interest.
Purchases from Construction Companies and Fabric Dyeing Business
The taxpayer also identified three construction companies and a fabric dyeing business from which it purchased scaffolding and a pressure washer, a concrete screed, a forklift, and storage racks. Three of these companies are not registered to collect Virginia sales tax. It is unclear whether the fourth business is a registered Virginia dealer. The taxpayer's purchases from three of these businesses were associated with the sellers going out of business.
The taxpayer maintains that since the sellers paid tax upon purchasing the equipment, the retail sales and use tax is not applicable to the later resale of such equipment to the taxpayer. However, a use tax is levied upon the consumption or use of tangible personal property in Virginia. See Code of Virginia § 58.1-604 (copy enclosed). The taxpayer uses the scaffolding, pressure washer, concrete screed, forklift, and storage racks in its construction business. Clearly, the taxpayer uses this equipment within the meaning of Code of Virginia § 58.1-604.
Code of Virginia § 58.1-609.10(2) (copy enclosed) provides an exemption from the retail sales and use tax for an occasional sale. An "occasional sale" is defined in Code of Virginia § 58.1-602 (copy enclosed) to mean:
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- (A) sale of tangible personal property not held or used by a seller in the course of an activity for which he is required to hold a certificate of registration, including the sale or exchange of all or substantially all the assets of any business and the reorganization or liquidation of any business, provided such sale or exchange is not one of a series of sales and exchanges sufficient in number, scope and character to constitute an activity requiring the holding of a certificate of registration.
The taxpayer has provided little information on the facts as they existed at the time of these purchases. Currently, I find no grounds for removing these purchases from the audit. However, if the taxpayer can prove that the construction companies and fabric dyeing business were not required to register as a dealer in selling the equipment purchased by the taxpayer, these transactions will be removed from the audit and the appropriate amount refunded. The taxpayer must provide the auditor with the name, phone number, and address of the construction companies and fabric dyeing business. Upon receipt of this information, the auditor will determine whether the construction companies and fabric dyeing business were required to register as a dealer to sell the equipment.
I will allow the taxpayer 60 days to provide invoices proving that tax was paid and to prove that other purchases qualified for the occasional sale exemption. Following the auditor's review of the requested information, the taxpayer will receive the appropriate refund, including amounts paid relating to the July 1995 purchase of wallcovering.
If the requested information is not received within the specified time frame, the assessment will be considered correct as issued, with the exception of amounts paid relating to the July 1995 purchase of wallcovering. If you have any questions, please call **** in the Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12405C
Rulings of the Tax Commissioner