Tax Type
Retail Sales and Use Tax
Description
Agriculture; Custom poultry transport system
Topic
Taxability of Persons and Transactions
Date Issued
01-19-1998
January 19, 1998
Dear ****
This will reply to your letter in which you seek correction of a sales and use tax assessment issued to ***** (the Taxpayer) for the period April 1994 through March 1997. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer is a subsidiary of a poultry growing and processing conglomerate. The Taxpayer operates several company-owned turkey farms and also provides service for turkeys raised by contract growers. The Taxpayer hatches its own turkey poults, transports the poults from the hatchery to the farms, and delivers the mature turkeys from the farms to the processing plant.
The Taxpayer was audited and assessed tax on recurring purchases and fixed assets. The Taxpayer contests the tax assessed on a trailer and a customized poult transport system built on the trailer for use in transporting baby poults from the hatchery to the farms. The Taxpayer believes that the sales tax exemption for agricultural production applies to the purchase of the poult transport system. The Taxpayer also maintains that since the customized trailer is used to haul poults from the hatchery to the farm, the vehicle should be classified as farm use.
DETERMINATION
Motor Vehicle Exemption: Code of Virginia Sec. 58.1-609.1(2) provides an exemption from the sales and use tax for ``[m]otor vehicles, trailers, semitrailers, mobile homes and travel trailers.' Motor vehicles are not subject to the retail sales and use tax provided they are subject to the motor vehicle sales and use tax administered by the Department of Motor Vehicles. Vehicles which are not subject to the motor vehicle sales and use tax are subject to the retail sales and use tax. Title 23 of the Virginia Administrative Code 10-210-990, copy enclosed.
The department's policy on truck body transactions is set out in Public Document 85-47 (3/8/85). This determination provides that a truck body is subject to Department of Motor Vehicle (DMV) taxation when titled as a unit with a truck chassis. The complete unit (chassis and body) will be taxed at the motor vehicle sales and use tax of 3%. This same Public Document further provides that the retail sales and use tax does apply to truck bodies which are installed on previously titled chassis because the truck bodies, by themselves, are not motor vehicles.
In this case, the trailer meets the definition of a ``motor vehicle' as provided above and is subject to the 3% motor vehicle sales and use tax. I find that the auditor was correct in allowing credit in the audit for the cost of the trailer as it is subject to the 3% motor vehicle sales and use tax. Because the poult transport system was installed on the previously titled trailer, the poult transport system is subject to the retail sales and use tax laws.
Agricultural Exemption: Code of Virginia Sec. 58.1-609.2(1) provides an exemption from the retail sales and use tax for ``...tangible personal property, except for structural construction materials to be affixed to real property owned or leased by a farmer, necessary for use in agricultural production for market and sold to or purchased by a farmer or contractor....'
The poult transport system in question is a customized container built on the Taxpayer's trailer. The poult transport system has been specially manufactured to accommodate and facilitate the care of the baby poults from the hatchery to the farms where they will be grown until ready for market.
Based on the purpose and use of the poult transport system, I find that it is necessary for use in agricultural production for market. The temperature regulated containers used to transport the baby poults maintain the integrity of the product by keeping the baby poults alive and preventing harm from coming to the poults during transportation.
Summary: The audit will be returned to the ***** District Office for revisions in accordance with this determination. The Taxpayer will receive a revised bill with updated interest. This bill should be paid within 30 days to avoid the accrual of additional interest. If you have any questions concerning this determination, please contact ***** in the Office of Tax Policy at *****.
Sincerely:
Danny M. Payne
Tax Commissioner
Rulings of the Tax Commissioner