Document Number
04-195
Tax Type
Retail Sales and Use Tax
Description
Taxpayer sells/services motorcycles/All-terrain vehicles (ATVs)
Topic
Exemptions
Date Issued
10-29-2004


October 29, 2004


Re: § 58.1-1821 Application: Retail Sales and Use Tax

Dear ************:

This is in reply to your letter in which you seek correction of the Department's retail sales and use tax audit assessment issued to ***** (the "Taxpayer") for the period September 1998 through August 2001. I apologize for the delay in the Department's response.

FACTS

The Taxpayer sells and services motorcycles and all-terrain vehicles (ATVs). During the audit period, the auditor assessed certain sales of ATV's that were supported by a certificate of exemption, specifically Form ST-18. This exemption certificate is for use by a farmer for the purchase of tangible personal property that is to be used in producing agricultural products for market. The Taxpayer contends that the denial of these exemption certificates on the basis that no address is listed on the certificate or that the certificate reflects a post office box number for the address is placing form over substance. The Taxpayer requests that the Department accept the exemption certificates and abate the assessed tax, penalty and interest associated with these sales.

The Taxpayer also seeks an adjustment to the assessment for transportation charges from the manufacturer listed on the Taxpayer's dealer prep notice to the customer. The Taxpayer contends that these charges are exempt pursuant to Va. Code § 58.1-609.5 3.

The Taxpayer also disagrees with the assessment of tax on manufacturers' rebates. The Taxpayer states it was previously advised by the Department that such rebates are not subject to tax.
DETERMINATION

Exemption Certificates

Virginia Code § 58.1-623 addresses the proper use and acceptance of exemption certificates and provides that::
    • All sales or leases are subject to the tax until the contrary is established. The burden of proving that a sale... of tangible personal property is not taxable is upon the dealer unless he takes from the taxpayer a certificate to the effect that the property is exempt under this chapter.

Title 23 of the Virginia Administrative Code (VAC) 10-210-280 explains that a certificate that is incomplete, invalid, infirm or inconsistent on its face is never acceptable, either before or after notice. The Certificate of Exemption Form ST-18 must be tendered by a farmer who is engaged in the business of producing agricultural products for market. In order for the certificate to be acceptable, it must be properly completed and contain the farmer's name, address, city, town or post office, state and zip code. Without all of the required information, the certificate is incomplete or invalid and is not acceptable. Accordingly, with regard to those exemption certificates where no address was listed, I do not find sufficient cause to revise the Department's audit.

In regard to the exemption certificates that were deemed invalid by the auditor because a mailing address was used rather than a physical address, I will allow those certificates to be accepted. Accordingly, the sales associated with these exemption certificates will be removed from the audit, and the corresponding tax, penalty and interest will be abated.

Freight

Comments by the auditor indicate that the transportation charges at issue are freight charges from the manufacturer to the Taxpayer. Virginia Code § 58.1-609.5 3 provides that separately stated transportation charges are exempt from the tax. Title 23 VAC 10-210-6000 interprets this statute and states:

    • Transportation and delivery charges do not include charges from a manufacturer to a retailer's place of business relative to purchases for resale, nor do they include handling charges.

Based on this regulation, I find that the auditor correctly assessed the tax on these charges. There is no basis to adjust the Department's assessment for this issue.

Rebates

Virginia Code § 58.1-603 imposes the sales tax on the "gross sales price" of tangible personal property sold in Virginia. "Sales price" is defined in Va. Code § 58.1­602 as "the total amount for which tangible personal property or services are sold . . . and includes any amount for which credit is given to the purchaser, consumer, or lessee by the dealer . . . ."

Title 23 VAC 10-210-430(A) discusses the application of sales tax to manufacturers' coupons and states that the value of a manufacturer's coupon is included in the sales price of the merchandise. Therefore, the sales tax is computed on the full price of the item, and credit is then given to the customer for the value of the manufacturer's coupon. In this instance, the units in the Taxpayer's inventory have tags attached noting that the manufacturer will reduce the price as an inducement to purchase the unit. This reduction is regarded as a manufacturer's discount because the Taxpayer will receive the full value of the unit sold. Accordingly, the auditor properly included these amounts in the Department's audit.

Claim of Misinformation

Virginia Code § 58.1-1835 requires the Tax Commissioner to abate any tax, interest and penalty attributable to erroneous advice furnished to a taxpayer in writing by an employee of the Department acting in his official capacity if the written advice was reasonably relied upon by the taxpayer and was in response to a specific written request by the taxpayer. In this case, the Taxpayer has not provided any documentation to support its claim that the Department furnished erroneous advice in writing in response to a written request from the Taxpayer. Therefore, I am unable to allow for any adjustment based on this claim.

Conclusion

Based on the foregoing, the Department's assessment will be adjusted to remove the sales associated with completed exemption certificates that reflect an address. A revised consolidated bill will be sent shortly to the Taxpayer. The total outstanding balance must be paid within 30 days of the date on the bill to avoid the accrual of additional interest. The Taxpayer should remit its payment to: Virginia Department of Taxation, 3600 West Broad Street, Suite 160, Richmond, Virginia 23230, Attention: *****. If you have any questions concerning the payment of the assessment, you may contact ***** at *****.

Please note that failure to remit payment for the outstanding balance of the assessments within the allotted time will result in the imposition of an additional 20% penalty on the unpaid tax. Please see the enclosure entitled "Important Payment Information."

The Code of Virginia sections and regulations cited, along with other reference documents, are available on-line in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.state.va.us. If you have any questions regarding this matter, please contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****@tax.state.va.us or at *****.
              • Sincerely,

              • Kenneth W. Thorson
                  • Tax Commissioner




AR/44308Q

Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46