Tax Type
Retail Sales and Use Tax
Description
Freight-in charges subject to tax
Topic
Basis of Tax
Date Issued
08-06-1999
August 6, 1999
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****
In your letter of June 16, 1999, you request a ruling regarding the application of freight-in charges by ***** (the Taxpayer).
As you are aware, Title 23 of the Virginia Administrative Code (VAC) 10-210-6000 (copy enclosed, formerly Virginia Regulation 630-10-107) sets out the department's established policy on transportation and delivery charges. Separately stated transportation or freight charges for the delivery from the seller to the purchaser, commonly known as "transportation-out' charges, qualify for exemption from the tax. The regulation sets out that transportation charges for delivery of resale products from the manufacturer to a retailer's place of business (i.e., "transportation-in' charges) do not qualify for the exemption, nor do handling charges.
As provided in Example 2 of the above regulation, the department also recognizes that a separately stated transportation charge for the delivery of merchandise from the manufacturer directly to the retail consumer would qualify as an exempt transportation charge, if separately stated and not marked up.
Thus, an incoming freight charge (i.e., a freight-in charge) for the delivery of resale merchandise from a manufacturer, wholesaler or other distributor to the Taxpayer's place of business does not qualify for exemption from the sales and use tax on a taxable retail sale. Such freight-in charge does not constitute delivery to the final consumer and is therefore a part of the cost of the product subject to the tax.
I regret that your customer may have been misinformed by a representative of the department. However, 23 VAC 10-210-6000 reflects longstanding policy and is an accurate representation of the department's position on transportation charges. Furthermore, the department has consistently ruled on freight-in and transportation-in issues. See the enclosed Public Documents (P.D.) 96-95 (5/16/96), 93-24 (2/10/93), and 92-202 (10/7/92). Accordingly, your request for a refund of sales tax paid on freight-in charges as a result of the department's 1996 audit must be denied.
If you have any questions about this response, please contact ***** of my Tax Policy staff at ******
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/23431R
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****
In your letter of June 16, 1999, you request a ruling regarding the application of freight-in charges by ***** (the Taxpayer).
As you are aware, Title 23 of the Virginia Administrative Code (VAC) 10-210-6000 (copy enclosed, formerly Virginia Regulation 630-10-107) sets out the department's established policy on transportation and delivery charges. Separately stated transportation or freight charges for the delivery from the seller to the purchaser, commonly known as "transportation-out' charges, qualify for exemption from the tax. The regulation sets out that transportation charges for delivery of resale products from the manufacturer to a retailer's place of business (i.e., "transportation-in' charges) do not qualify for the exemption, nor do handling charges.
As provided in Example 2 of the above regulation, the department also recognizes that a separately stated transportation charge for the delivery of merchandise from the manufacturer directly to the retail consumer would qualify as an exempt transportation charge, if separately stated and not marked up.
Thus, an incoming freight charge (i.e., a freight-in charge) for the delivery of resale merchandise from a manufacturer, wholesaler or other distributor to the Taxpayer's place of business does not qualify for exemption from the sales and use tax on a taxable retail sale. Such freight-in charge does not constitute delivery to the final consumer and is therefore a part of the cost of the product subject to the tax.
I regret that your customer may have been misinformed by a representative of the department. However, 23 VAC 10-210-6000 reflects longstanding policy and is an accurate representation of the department's position on transportation charges. Furthermore, the department has consistently ruled on freight-in and transportation-in issues. See the enclosed Public Documents (P.D.) 96-95 (5/16/96), 93-24 (2/10/93), and 92-202 (10/7/92). Accordingly, your request for a refund of sales tax paid on freight-in charges as a result of the department's 1996 audit must be denied.
If you have any questions about this response, please contact ***** of my Tax Policy staff at ******
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/23431R
Rulings of the Tax Commissioner