Tax Type
Retail Sales and Use Tax
Description
List of Exemptions, Exceptions and Exclusions
Topic
Exemptions
Date Issued
01-08-1999
January 8, 1999
Re: Ruling Request: Retail Sales and Use Tax
Dear *******************
In your letter of October 1, 1998, you request a ruling concerning the application of the retail sales and use tax to seafood packaging and boat conversion operations performed by your client (the Taxpayer).
FACTS
You indicate that the Taxpayer engages in seafood canning or packaging operations. As a sideline, the Taxpayer also buys boats at auction to refinish and rebuild them for resale at wholesale or retail. These boats are never used in the Taxpayer's seafood packaging operations.
You maintain that these two activities of the Taxpayer constitute industrial manufacturing or processing operations and therefore should qualify for the exemption set out by Code of Virginia § 58.1-609.3(2), copy enclosed.
DETERMINATION
Industrial manufacturing or processing exemption. In order for a business to obtain the industrial manufacturing or processing exemption, it first must be manufacturing or processing products for sale or resale and secondly, such production must be industrial in nature.1 Code of Virginia § 58.1-602 provides that the term "industrial' as used in relation to the manufacturing and processing exemption contained in Code of Virginia § 58.1-609.3(2) includes those activities classified in codes 10-14 and 20-39 of the Standard Industrial Classification (SIC) Manual.
Seafood packaging. SIC code #2091 applies to "[e]stablishments primarily engaged in cooking and canning fish, shrimp, oysters, clams, crabs, and other seafoods, including soups; and those engaged in smoking, salting, drying, or otherwise curing fish and other seafoods for the trade.' Accordingly, a business which meets all of the criteria of this SIC code description would qualify for the exemptions set forth in Code of Virginia § 58.1-609.3(2). For example, the business must be primarily engaged in the described activities and sell its product generally for the trade.
Provided the Taxpayer's seafood canning or packaging operation can be accurately described as an activity under SIC code #2091, such operation would be entitled to the exemptions set forth in Code of Virginia § 58.1-609.3(2).
Boat building and repair. SIC code #3732 applies to "[e]stablishments primarily engaged in building and repairing boats.' Although the Taxpayer does not primarily engage in the building, assembling and repairing of boats, this activity is deemed industrial in nature and is entitled to the exemptions set forth in Code of Virginia § 58.1-609.3(2), provided the Taxpayer continues to be primarily engaged in other types of industrial manufacturing or processing activities, such as its seafood packaging business.
Certificates of exemption. When the Taxpayer purchases exempt equipment or industrial materials for use directly in its production process, it must complete and furnish an exemption certificate, Form ST-11, to its vendor. The retail sales and use tax (4.5% rate) applies to seafood packaging sales made by the Taxpayer unless the purchaser furnishes the Taxpayer with a completed certificate of exemption. If the purchaser is buying for resale purposes only, the proper exemption certificate to receive from the purchaser is the Form ST-10.2 If the Taxpayer makes or anticipates making any taxable sales subject to the retail sales and use tax, it must be registered with the department to collect and remit such tax.
If no exemption applies, the Taxpayer's sales of motorized boats of any size and non-motorized sailboats which exceed eighteen feet in length3 are subject to the watercraft sales and use tax (2% rate not to exceed maximum tax of $2,000).4 Based on the facts presented, it appears that the Taxpayer would need to be registered with the department to collect and remit the watercraft sales and use tax.
This ruling is based on the limited facts presented. If the Taxpayer's circumstances change or certain factual information was not presented, the application of the tax stated herein may be affected.
I trust that the foregoing answers the issues raised. If you have any questions about this ruling, please contact *************** of my tax policy staff at ****************.
Sincerely,
Danny M. Payne
Tax Commissioner
1See Title 23 of the Virginia Administrative Code (VAC) 10-21 0-920(A); copy enclosed.
2See 23 VAC 10-210-280, copy enclosed.
3Canoes, kayaks, row boats, small sailboats (under 18 feet in length) and other nonmotorized boats are subject to the 4.5% retail sales and use tax when sold at retail. See Tax Bulletin 97-5 (12119197), copy enclosed.
4See Code of Virginia Secs.58.1-1401 and 58.1-1402, eff. January 1, 1998; copies enclosed.
Rulings of the Tax Commissioner