Bulletin Number
VTB 88-11
Tax Type
Aircraft Sales and Use Tax
Retail Sales and Use Tax
Watercraft Sales and Use Tax
Description
Special Use Tax on Construction Equipment Brought Into Virginia
Topic
Basis of Tax
Date Issued
06-13-1988
Special Use Tax on Construction Equipment Brought Into Virginia
The 1988 Session of the Virginia General Assembly enacted a special use tax upon the storage or use of all motor vehicles, aircraft, watercraft, machines, machinery, tools, or other equipment brought into Virginia for use in real estate construction contracts (House Bill 555). This special tax became effective on March 30, 1988.
RATE OF THE SPECIAL USE TAX
- The rate of the special use tax is 3|1/2%, except for:
-
- -watercraft, which are taxed at 2%, with a maximum tax of $1,000;
-aircraft, which are taxed at 2%; and
-motor vehicles, which are taxed at 3%;
- -watercraft, which are taxed at 2%, with a maximum tax of $1,000;
SCOPE OF SPECIAL USE TAX
- The special use tax applies only to property purchased or leased in another state and brought into Virginia.
- The credit for sales tax paid to another state is not applicable when computing the special use tax.
- Exempt from the special use tax are contractors located in states which do not impose a similar use tax on Virginia contractors. A "similar use tax' is one that applies to all property imported into a state for use in contracts respecting real estate, without credit for sales tax paid to another state on the purchase of the equipment.
APPLICATION OF THE SPECIAL USE TAX
- The special use tax does not apply to transactions which are taxed under the retail sales and use tax, motor vehicle sales and use tax, aircraft sales and use tax, or watercraft sales and use tax.
- Following are examples of situations where the special use tax does and does not apply:
Example 1: An out-of-state construction contractor purchases and takes delivery of equipment in Virginia. The transaction is subject to the 4|1/2% Virginia sales tax and the special use tax does not apply.
Example 2: A construction contractor purchases equipment from a North Carolina dealer, but takes delivery of the equipment at his job site in Virginia. As first use of the equipment occurs in Virginia, the transaction is subject to the 4|1/2% Virginia use tax and the special use tax does not apply.
Example 3: A construction contractor brings into Virginia equipment purchased in North Carolina, upon which the 5% North Carolina sales tax was paid. The contractor is able to claim a full credit against the 4|1/2% Virginia use tax for the sales tax he paid to North Carolina. The special use tax applies; however, as the 4|1/2% Virginia use tax was not required to be paid on the equipment.
- Motor Vehicles Specifically: The motor vehicle sales and use tax generally applies to motor vehicles (as defined in Virginia Code § 58.1-2401) titled or rented in Virginia. The special use tax applies to motor vehicles brought into Virginia for use in construction contracts which are not subject to the motor vehicle sales and use tax, including those:
-
- -registered in Virginia for the first time which bear valid out-of-state titles or registrations (exempt from the motor vehicle sales and use tax under Virginia Code § 58.1-2403) or
-subject to the out-of-state tax credit provisions of Virginia Code § 58.1-2424 upon which no Virginia motor vehicle sales and use tax is due.
- -registered in Virginia for the first time which bear valid out-of-state titles or registrations (exempt from the motor vehicle sales and use tax under Virginia Code § 58.1-2403) or
- Aircraft Specifically: The aircraft sales and use tax generally applies to aircraft (as defined in Virginia Code § 58.1-1501) sold or required to be licensed in Virginia (licensing is required when an aircraft is based in Virginia for 60 or more days during a year). The special use tax applies to aircraft brought into Virginia for use in construction contracts which are not subject to the aircraft sales and use tax, including those:
-
-
-
- -based in Virginia for less than 60 days or
-subject to the out-of-state tax credit provisions of Virginia Code § 58.1-1409 upon which no Virginia watercraft sales and use tax is due.
- -based in Virginia for less than 60 days or
-
-
- Watercraft Specifically: The watercraft sales and use tax applies to watercraft (as defined in Virginia Code § 58.1-1401) required to be titled in Virginia (titling is required before watercraft may be operated in the state). The special use tax applies to watercraft brought into Virginia for use in construction contracts which are not subject to the watercraft sales and use tax, including those:
-
- -subject to the out-of-state tax credit provisions of Virginia Code § 58.1-1504 upon which no Virginia aircraft sales and use tax is due.
BASIS OF SPECIAL USE TAX
--The special use tax is computed based on 3 factors: the original purchase price of the property, the amount of time the property is used in Virginia, and the overall useful life of the property. The formula for computing the tax is as follows:
Original Purchase Price X Duration
of Time of Use in Virginia
-------------------------- = Taxable Base X Tax Rate = Tax
Total Useful Life
- In the absence of satisfactory evidence as to the period of use intended in Virginia, it will be presumed that property brought into this state will remain here for the remainder of its useful life.
- The term "use' includes any use, consumption, or storage in Virginia, as well as "stand-by' time due to weather delays or any other cause.
- Example: Prior to being brought into Virginia, a piece of equipment costing $10,000 was used outside of the state for 5 years of its estimated useful life of 10 years. In the absence of satisfactory evidence as to the intended period of use in Virginia, the tax would be $175, computed as follows:
$10,000 X 5 (years)
------------------- = $5,000 X 3 1/2% = $175
10 (years)
REGISTRATION AND PAYMENT OF THE TAX
- Contractors must file returns for each quarter during which equipment subject to the tax is brought into Virginia. Returns must be postmarked by the 15th day of the month following the end of the calendar quarter, i.e., April 15, July 15, October 15, or January 15. The first return will be due on July 15, 1988.
FORMS AND INFORMATION
Forms and information on the filing and payment of the special use tax may be obtained by calling the Department of Taxation at (804) 367-8037 or by writing: Department of Taxation, Taxpayer Assistance Section, P. O. Box 6-L, Richmond, Virginia 23282. The department's district offices, located in Bristol, Danville, Falls Church, Hampton, Harrisonburg, Norfolk, Richmond, and Roanoke also have forms available and can answer your questions.
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