Tax Type
Retail Sales and Use Tax
Description
Services; Professional or personal; Sale and spreading of pesticide.
Topic
Taxability of Persons and Transactions
Date Issued
11-19-1997
November 19, 1997
Re: Ruling Request: Retail Sales and Use Tax
Dear*************
This will reply to your letter of August 29, 1997, in which you seek a ruling on the application of the Virginia sales and use tax on the sale and spreading of pesticide chemicals.
FACTS
The Taxpayer is engaged in the production of chemicals and the spreading of chemicals for customers. The Taxpayer produces a granular pesticide that is effective in controlling mole crickets and other insects that destroy turf at golf courses. The granular pesticide is sold only through the Taxpayer's trained agents and must be applied to the turf with special direct slit-application equipment. The customer is charged a lump sum charge of $315 per acre for the product which includes application charges. The Taxpayer requests a ruling on the application of the tax to the above described transaction.
RULING
Code of Virginia § 58.1-609.5(1) exempts from the sales and use tax professional and personal service transactions which involve sales as inconsequential elements for which no separate charges are made. When determining whether a particular transaction involving both the sale of tangible personal property and the provision of a service represents a sale of tangible personal property or an exempt service, the "true object" test is used. Title 23 of the Virginia Administrative Code (VAC) 10-210-4040(D) states "[i]f the object of the transaction is to secure a service and the tangible personal property which is transferred to the customer is not critical to the transaction, then the transaction may constitute an exempt service." The Virginia Supreme Court held in Commonwealth v. Pounding Mill Quarry, 215 Va. 647, 212 S.E. 2d 428 (1975), that the spreading of agricultural lime for a per-acre charge was a nontaxable service transaction when charges for transporting and spreading the lime were not separate from charges for the lime itself.
Based on the above, the Taxpayer is providing a nontaxable service when it charges a flat per-acre charge for the chemicals which includes the application charges. As a service provider, the Taxpayer is the taxable user and consumer of all of the tangible personal property purchased for use in providing exempt services. See 23 VAC 10-210-4040(E). I note that if a supplier fails to collect the tax from the Taxpayer on its purchases, the Taxpayer must remit use tax to the department as provided in 23 VAC 10-210-6030.
I trust the information provided has addressed your concerns. If you have additional questions or desire to register with the department to remit consumer use tax, please contact ********* in the Office of Tax Policy at ****** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12927T
Rulings of the Tax Commissioner