Bulletin Number
VTB 91-4
Tax Type
General Provisions
Retail Sales and Use Tax
Description
Impact of Federal Excise Tax Increases on Virginia Sales and Use Taxes
Topic
Basis of Tax
Date Issued
04-03-1991
IMPACT OF FEDERAL EXCISE TAX INCREASES ON
VIRGINIA SALES AND USE TAXES
VIRGINIA SALES AND USE TAXES
As a result of federal legislation, effective January 1, 1991, a new federal excise tax is imposed on "luxury" items over special dollar limits:
- 30,000 for passenger autos
- $100,000 for boats
- $250,000 for aircraft
- $10,000 for jewelry and furs
In addition, beer, wine, alcohol, tobacco and motor fuel excise taxes were increased. Because the new federal excise taxes may be included in the base for computing sales and use tax, persons that collect and remit the taxes may be affected by these new changes.
IMPACT ON RETAIL SALES AND USE TAX
Beer, Wine and Tobacco: The retail sales and use tax applies to the retail sale of beer, wine and tobacco products. The base for computing the tax will include the increased price of these items due to the federal rate change for beer, wine, cigarettes and other tobacco products.
Luxury Tax: Va. Code §58.1-602 excludes federal retailer's excise taxes from the base for computing the retail sales and use tax. The new federal luxury tax on jewelry and furs is classified as a retailer's excise tax and will not be included in the base for computing the retail sales and use tax on jewelry and furs.
Motor Vehicles: Sales, leases, and rentals of 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 (DMV). DMV has announced that the federal luxury tax should not be included in sales price for purposes of computing the motor vehicle sales tax.
IMPACT ON AIRCRAFT AND WATERCRAFT SALES AND USE TAX
The base for computing the aircraft and watercraft sales and use taxes excludes manufacturer's excise taxes, but not retailer's excise taxes. Thus, the new federal excise tax on aircraft and watercraft will be included in the base for computing the aircraft and watercraft sales and use tax since it is classified as a retailer's tax.
IMPACT ON MOTOR FUEL TAXES
Retail Sales and Use Tax: The retail sales and use tax does not apply to motor vehicle fuels taxed fuel taxes administered by the DMV, unless the motor fuel or special fuel tax does not apply or is refunded, i.e., a refund for off-road use. The retail sales and use tax would then be levied on the sales price of the fuel unless the purchaser is statutorily exempt from the tax; however, Va. Code §58.1-602 excludes from sales price the federal diesel fuel excise tax if separately stated (no similar provision is made for the federal gasoline excise tax).
Increases in the price of gasoline as a result of the increased federal gasoline excise tax will be included for purposes of computing any applicable retail sales and use tax. The additional diesel fuel excise tax will not be included for purposes of computing the retail sales and use tax, provided it is separately stated on the seller's invoice.
Northern Virginia Motor Vehicle Fuel Sales Tax: The federal gasoline tax increase will have an impact on the motor vehicle fuel sales tax imposed in the Northern Virginia and Potomac and Rappahannock Transportation Districts. The base for computing the motor vehicle fuel sales tax is the same as the retail sales and use tax. Thus, the federal gasoline excise tax will be included in the tax base, while the federal diesel fuel excise tax will not, if it is separately stated.
For additional information: Please call the Department of Taxation at (804) 367-8037 or write: 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 are also available to answer your questions.
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