Tax Type
Retail Sales and Use Tax
Description
Samples withdrawn from inventory
Topic
Property Subject to Tax
Date Issued
11-30-1998
November 30, 1998
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****
In your letter of November 9, 1998, you request a ruling on the application of the retail sales and use tax to vinyl applicator packs ("sample packs').
FACTS
A Virginia roofing material manufacturer (the "Taxpayer') distributes sample packs to wholesale distributors to market its roofing products. A sample pack consists of a multiple pouch vinyl sheet and a header card. Pieces of the Taxpayer's roofing product are inserted in the pouches and can be removed for examination.
Your firm (an out-of-state "Supplier') furnishes all material and labor for the sample packs, except for the actual roofing product. The Taxpayer informs the Supplier as to the quantity and destination point of the sample packs. The Supplier packages and arranges for shipping the sample packs.
Sample packs are furnished to distributors free of charge. The Taxpayer deems the sample packs to have no value.
RULING
Code of Virginia Sec. 58.1-603 imposes the retail sales tax on the gross sales price of each article of tangible personal property when sold at retail, distributed or stored for use or consumption in Virginia. If the retailer does not collect the sales tax, Code of Virginia Sec. 58.1-604 imposes a use tax on the cost price of each item or article of tangible personal property used or consumed in Virginia. Accordingly, the tax on property acquired for use in Virginia is not based on the value of the article but on the actual cost of the property.
"Use' is defined in Code of Virginia Sec. 58.1-602 as "the exercise of any right or power over tangible personal property incident to the ownership thereof, except that is does not include the sale at retail of that property in the regular course of business.'
Clearly, the sample packs are not purchased for resale purposes but for the Taxpayer's use or consumption. Accordingly, the charge for the sample packs distributed by the Supplier into Virginia is subject to the sales and use tax, regardless of whether the sample packs delivered to the Taxpayer in Virginia are subsequently redistributed by the Taxpayer to distributors in or outside Virginia. If only a portion of the sample packs is distributed by the Supplier into Virginia, then only that portion delivered into Virginia is subject to the tax.
In addition, the Taxpayer is liable for the tax on the fabricated cost price of the roofing materials furnished the Supplier from a Virginia inventory, notwithstanding that some or most of the materials are subsequently distributed with sample packs for use outside Virginia.
If you have any questions about this ruling, please contact ***** of the department's Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/18221R
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****
In your letter of November 9, 1998, you request a ruling on the application of the retail sales and use tax to vinyl applicator packs ("sample packs').
FACTS
A Virginia roofing material manufacturer (the "Taxpayer') distributes sample packs to wholesale distributors to market its roofing products. A sample pack consists of a multiple pouch vinyl sheet and a header card. Pieces of the Taxpayer's roofing product are inserted in the pouches and can be removed for examination.
Your firm (an out-of-state "Supplier') furnishes all material and labor for the sample packs, except for the actual roofing product. The Taxpayer informs the Supplier as to the quantity and destination point of the sample packs. The Supplier packages and arranges for shipping the sample packs.
Sample packs are furnished to distributors free of charge. The Taxpayer deems the sample packs to have no value.
RULING
Code of Virginia Sec. 58.1-603 imposes the retail sales tax on the gross sales price of each article of tangible personal property when sold at retail, distributed or stored for use or consumption in Virginia. If the retailer does not collect the sales tax, Code of Virginia Sec. 58.1-604 imposes a use tax on the cost price of each item or article of tangible personal property used or consumed in Virginia. Accordingly, the tax on property acquired for use in Virginia is not based on the value of the article but on the actual cost of the property.
"Use' is defined in Code of Virginia Sec. 58.1-602 as "the exercise of any right or power over tangible personal property incident to the ownership thereof, except that is does not include the sale at retail of that property in the regular course of business.'
Clearly, the sample packs are not purchased for resale purposes but for the Taxpayer's use or consumption. Accordingly, the charge for the sample packs distributed by the Supplier into Virginia is subject to the sales and use tax, regardless of whether the sample packs delivered to the Taxpayer in Virginia are subsequently redistributed by the Taxpayer to distributors in or outside Virginia. If only a portion of the sample packs is distributed by the Supplier into Virginia, then only that portion delivered into Virginia is subject to the tax.
In addition, the Taxpayer is liable for the tax on the fabricated cost price of the roofing materials furnished the Supplier from a Virginia inventory, notwithstanding that some or most of the materials are subsequently distributed with sample packs for use outside Virginia.
If you have any questions about this ruling, please contact ***** of the department's Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/18221R
Rulings of the Tax Commissioner