10-189 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Sales tax application to retail sales, refunds and exchanges involving core charges

Topic

Clarification

Date Issued

08-26-2010

August 26, 2010

Re: Request for Ruling: Retail Sales and Use Tax

Dear *****:

This is in response to your letter in which your request a ruling in regard to the application of the retail sales and use tax to core charges made by ***** (the Taxpayer).

FACTS

The Taxpayer is a retailer of automotive parts and accessories. It seeks clarification of the sales tax application to retail sales, refunds and exchanges involving core charges.

RULING

An explanation of the basis for taxing core charges is set out in Public Document (P.D.) 97-475 (12/10/97). In that ruling, a dealer sold automotive parts and depending on the item sold, it would also charge the customer a core charge. The core charge represents an additional charge should the customer not exchange the non-functioning used or worn automotive part for the new part purchased. The Tax Commissioner determined that core charges are subject to taxation because they are part of the sales price of the item sold. The Taxpayer submits several questions that are set out and addressed below.

Question 1

Are core charges subject to sales tax? If so, does this apply to all core charges or are some exempt?

Yes. All core charges are subject to the Virginia retail sales and use tax in accordance with P.D. 97-475.

Question 2

In the event of a full refund of a part and its related core charge (i.e., an undamaged return), is the sales tax refunded on the, core charge?

Yes. A full refund of the tax is appropriate in this instance.

Question 3

In the event of a partial refund of a part (i.e., a prorated battery or damaged return) and its related core charge, is the sales tax refunded on the core charge.

Yes. A tax refund is allowed to the extent of the partially refunded sales price of the part plus the related core charge. See Title 23 of the Virginia Administrative Code 10-210-3080 on returned goods.

Question 4

In the event of a core charge refund only, is the sales tax refunded? For example, if a customer neglects to bring a core in when purchasing a part but brings it in at a later date and is then refunded for his core, is the sales tax refunded?

The answer is "yes" to both questions.

Question 5

In the event of a core exchange, is sales tax refunded on the returned core? For example, if a customer purchases an alternator for $50 plus a $15 core charge and returns a core and receives a $15 credit, is the taxable amount $65 (i.e., $50 + $15) or $50 (i.e., $50 +$15-$15) ?

Yes. The taxable amount in your example is initially $65; but with the return of the bad alternator or core, the taxable amount drops to $50.

This response is based on the facts provided as summarized above. Any change in facts or the introduction of new facts may lead to a different result.

The regulation and public document cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this ruling, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.

- - - - Sincerely,

- - - - Craig M. Burns
        Acting Tax Commissioner

AR/1-4363871565.R

Rulings of the Tax Commissioner