Tax Type
Retail Sales and Use Tax
Description
Purchase of useless equipment.
Topic
Taxability of Persons and Transactions
Date Issued
12-15-1997
December 15, 1997
Re: § 58.1 -1821 Application: Retail Sales and Use Tax
Dear*****************
This will reply to your letter in which you seek the correction of an assessment issued to*********** (the "Taxpayer") for the period July 1991 through March 1997.
FACTS
The Taxpayer is a physical therapy center that was assessed use tax on the purchase of a piece of equipment for use in a clinical study. The Taxpayer realized after the purchase that the equipment was useless because its use was not approved by the Food and Drug Administration. Since the study was never done and the equipment cannot be used by the Taxpayer, the Taxpayer maintains that the purchase should not be subject to use tax.
DETERMINATION
Code of Virginia § 58.1-604 imposes a use tax on "the cost price of each item or article of tangible personal property used or consumed in this Commonwealth". Use is defined in Code of Virginia § 58.1-602 as "the exercise of any right or power over tangible personal property incident to the ownership thereof, except that it does not include the sale at retail of that property in the regular course of business".
The Taxpayer is a provider of physical therapy services and is considered the consumer of all tangible personal property used in providing its services. Taxpayers that provide professional services are required to pay the sales tax to suppliers at the time of purchase or, if the supplier fails to collect the tax, remit use tax on a Consumer's Use Tax Return, Form ST-7. Unless a statutory exemption applies to a particular purchase, the applicable sales or use tax should be paid on all purchases used or consumed by the business.
There is no apparent exemption that applies to the Taxpayer's purchase of the equipment in question. While the Taxpayer may not be using the equipment in the business, the Taxpayer has exercised use of the property in Virginia. This is sufficient to trigger the imposition of use tax on the purchase. For this reason, the auditor properly held the purchase taxable. While I am sympathetic with your situation, this item must remain in the audit.
The Taxpayer may remit payment for the balance of the assessment of***** to****in the Office of Tax Policy, P. O. Box 1880, Richmond, Virginia 23218-1880. If you have any questions, please contact**** at ********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12966S
Rulings of the Tax Commissioner