Tax Type
Retail Sales and Use Tax
Description
Agriculture; Taxable construction materials
Topic
Exemptions
Property Subject to Tax
Date Issued
06-30-1999
June 30, 1999
Re: Sec. 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This is in response to your letter requesting correction of the sales and use tax audit assessment issued to ***** (the Taxpayer). Copies of cited resources are enclosed.
FACTS
The Taxpayer is a greenhouse operation. An audit for the period of January 1996 through March 1998 resulted in an assessment of use tax on untaxed purchases of tangible personal property incorporated in real estate or considered used in a manner not qualifying for the agricultural production exemption.
The Taxpayer takes exception to the tax assessed on concrete, rebar and bar angle which it purchased and installed in its greenhouses for use as a flood floor for watering and fertilizing plants grown for sale. The Taxpayer also takes exception to the assessment of use tax on tanks and a basin used as part of a system to recycle waste water from the flood floor. The Taxpayer maintains that these items should be treated in the same manner as irrigation lines and sprinkler heads exempted by Title 23 of the Virginia Administrative Code (VAC) 10-210-50(A).
DETERMINATION
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....' [Emphasis added.]
Interpreting the above statute, 23 VAC 10-21 -50(A) provides that the term structural construction materials includes, but is not limited to, "greenhouses, including plastic covered houses....' However, this regulation provides that the term structural construction materials specifically excludes "irrigation lines and sprinkler heads.'
It is my understanding that the concrete was poured from wall to wall within the greenhouses and serves as the floor of the greenhouses. Rebar and bar angle were embedded in the concrete to further reinforce and strengthen it. As the concrete flooring is clearly an integral part of the overall structure, I find that the flooring becomes a permanent part of the realty. As such, the flooring constitutes taxable structural construction materials. I also find no basis to conclude that this flooring constitutes an irrigation line or a sprinkler head. Accordingly, these untaxed materials will remain in the department's audit.
Based on the facts presented, the tanks and basin at issue serve as part of a filtering system used to trap and separate waste by-products from the irrigation process. It is my understanding that solid waste by-products are not re-used as agricultural supplies. Rather, they are discarded. It is also my understanding that the waste water is usually sprayed on the ground rather than re-used to irrigate plants grown for sale. As it appears that these items are used more for waste water treatment purposes than for agricultural purposes, no exemption is available for items used in the waste water treatment process under the provisions of Code of Virginia Sec. 58.1-609.2(1). However, Code of Virginia Sec. 58.1-609.3(9)(I) does exempt from the tax property classified as "certified pollution control equipment and facilities.' In order to qualify for this exemption, certification of this system's pollution control status must be obtained from the Department of Environmental Quality (DEQ). Because certification has not been received, no exemption is available for the tanks and basin.
In conclusion, I find no basis for revising the audit. Updated bills for the outstanding liabilities will be sent to the Taxpayer under separate cover and should be paid within 30 days of the date of this letter to avoid further interest charges.
If you have any questions about this determination, please contact ***** of my tax policy staff at *****
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/20513R
Re: Sec. 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This is in response to your letter requesting correction of the sales and use tax audit assessment issued to ***** (the Taxpayer). Copies of cited resources are enclosed.
FACTS
The Taxpayer is a greenhouse operation. An audit for the period of January 1996 through March 1998 resulted in an assessment of use tax on untaxed purchases of tangible personal property incorporated in real estate or considered used in a manner not qualifying for the agricultural production exemption.
The Taxpayer takes exception to the tax assessed on concrete, rebar and bar angle which it purchased and installed in its greenhouses for use as a flood floor for watering and fertilizing plants grown for sale. The Taxpayer also takes exception to the assessment of use tax on tanks and a basin used as part of a system to recycle waste water from the flood floor. The Taxpayer maintains that these items should be treated in the same manner as irrigation lines and sprinkler heads exempted by Title 23 of the Virginia Administrative Code (VAC) 10-210-50(A).
DETERMINATION
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....' [Emphasis added.]
Interpreting the above statute, 23 VAC 10-21 -50(A) provides that the term structural construction materials includes, but is not limited to, "greenhouses, including plastic covered houses....' However, this regulation provides that the term structural construction materials specifically excludes "irrigation lines and sprinkler heads.'
It is my understanding that the concrete was poured from wall to wall within the greenhouses and serves as the floor of the greenhouses. Rebar and bar angle were embedded in the concrete to further reinforce and strengthen it. As the concrete flooring is clearly an integral part of the overall structure, I find that the flooring becomes a permanent part of the realty. As such, the flooring constitutes taxable structural construction materials. I also find no basis to conclude that this flooring constitutes an irrigation line or a sprinkler head. Accordingly, these untaxed materials will remain in the department's audit.
Based on the facts presented, the tanks and basin at issue serve as part of a filtering system used to trap and separate waste by-products from the irrigation process. It is my understanding that solid waste by-products are not re-used as agricultural supplies. Rather, they are discarded. It is also my understanding that the waste water is usually sprayed on the ground rather than re-used to irrigate plants grown for sale. As it appears that these items are used more for waste water treatment purposes than for agricultural purposes, no exemption is available for items used in the waste water treatment process under the provisions of Code of Virginia Sec. 58.1-609.2(1). However, Code of Virginia Sec. 58.1-609.3(9)(I) does exempt from the tax property classified as "certified pollution control equipment and facilities.' In order to qualify for this exemption, certification of this system's pollution control status must be obtained from the Department of Environmental Quality (DEQ). Because certification has not been received, no exemption is available for the tanks and basin.
In conclusion, I find no basis for revising the audit. Updated bills for the outstanding liabilities will be sent to the Taxpayer under separate cover and should be paid within 30 days of the date of this letter to avoid further interest charges.
If you have any questions about this determination, please contact ***** of my tax policy staff at *****
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/20513R
Rulings of the Tax Commissioner