Tax Type
Retail Sales and Use Tax
Description
Agriculture; Permanent fencing
Topic
Taxability of Persons and Transactions
Date Issued
11-30-1998
November 30, 1998
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****
This will reply to your letter of October 9, 1998, in which you (the "Taxpayer') request a ruling on the sales and use tax treatment of fencing materials purchased for use in the containment of livestock.
FACTS
The Taxpayer, a farmer, questions the application of the agricultural exemption to the purchase of high-tensile wire, insulators, staples and fence posts for the purpose of erecting electrified fencing for the containment of cattle along a river frontage.
The Taxpayer cites Code of Virginia Sec. 58.1-609.2(1), which exempts from the sales and use tax "... tangible personal property, except for structural construction materials to be affixed to real property owned or leased by a farmer....' The Taxpayer contends that the proposed fence does not constitute a "structure of the sort the legislature wanted to tax,' as livestock fences furnish no protection from the elements as other structures do. The Taxpayer believes that the nature of fencing tends to be more temporary than permanent and seeks verification that purchases of fencing materials may be made exempt of the tax.
RULING
Title 23 of the Virginia Administrative Code (VAC) 10-210-50, copy enclosed, interprets Code of Virginia Sec. 58.1-609.2(1) and specifically states "The term "structural construction materials' includes but is not limited to ... permanent fencing ... electrical wiring.... These items are therefore subject to the tax.'
The term "structural construction materials' is not limited to the literal meaning of the term "structures,' but rather encompasses those materials which become a part of real property. Tangible personal property which will become a part of real property at the time of its use and loses its tangible status does not enjoy an exemption from the tax. As stated in the enclosed regulations, permanent fencing is considered taxable upon its purchase. Furthermore, the Taxpayer has indicated that the fencing is intended to remain erected until natural elements warrant replacement.
The statutory exemption is administered based on agricultural production and not on the ancillary activities which support that production. In addition, the Virginia courts have consistently required strict construction of sales tax exemptions, i.e., where there is any doubt as to the application of an exemption, the doubt is resolved against the one claiming the exemption. Consequently, the purchase of the materials at issue is taxable.
If you should have any additional questions, please contact ***** of the department's Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/17891Q
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****
This will reply to your letter of October 9, 1998, in which you (the "Taxpayer') request a ruling on the sales and use tax treatment of fencing materials purchased for use in the containment of livestock.
FACTS
The Taxpayer, a farmer, questions the application of the agricultural exemption to the purchase of high-tensile wire, insulators, staples and fence posts for the purpose of erecting electrified fencing for the containment of cattle along a river frontage.
The Taxpayer cites Code of Virginia Sec. 58.1-609.2(1), which exempts from the sales and use tax "... tangible personal property, except for structural construction materials to be affixed to real property owned or leased by a farmer....' The Taxpayer contends that the proposed fence does not constitute a "structure of the sort the legislature wanted to tax,' as livestock fences furnish no protection from the elements as other structures do. The Taxpayer believes that the nature of fencing tends to be more temporary than permanent and seeks verification that purchases of fencing materials may be made exempt of the tax.
RULING
Title 23 of the Virginia Administrative Code (VAC) 10-210-50, copy enclosed, interprets Code of Virginia Sec. 58.1-609.2(1) and specifically states "The term "structural construction materials' includes but is not limited to ... permanent fencing ... electrical wiring.... These items are therefore subject to the tax.'
The term "structural construction materials' is not limited to the literal meaning of the term "structures,' but rather encompasses those materials which become a part of real property. Tangible personal property which will become a part of real property at the time of its use and loses its tangible status does not enjoy an exemption from the tax. As stated in the enclosed regulations, permanent fencing is considered taxable upon its purchase. Furthermore, the Taxpayer has indicated that the fencing is intended to remain erected until natural elements warrant replacement.
The statutory exemption is administered based on agricultural production and not on the ancillary activities which support that production. In addition, the Virginia courts have consistently required strict construction of sales tax exemptions, i.e., where there is any doubt as to the application of an exemption, the doubt is resolved against the one claiming the exemption. Consequently, the purchase of the materials at issue is taxable.
If you should have any additional questions, please contact ***** of the department's Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/17891Q
Rulings of the Tax Commissioner