Tax Type
Retail Sales and Use Tax
Description
Virginia sales or use tax applies to materials in international commerce.
Topic
Exemptions
Sale for Resale
Tangible Personal Property
Date Issued
12-13-2012
December 13, 2012
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in response to your letter in which you request a ruling on the application of the retail sales and use tax to materials sold by ***** (the "Taxpayer") to a construction contractor who ships the materials from a consolidated receiving point in Virginia.
FACTS
The Taxpayer is a registered Virginia dealer that sells materials to a customer who constructs US embassies overseas. The customer's Virginia warehouse is a consolidated receiving point (CRP). This means that materials destined to classified overseas projects must be shipped to the CRP, where the materials are received, temporarily stored and prepared for overseas shipment. Once the materials are ready for shipment, a U.S. State Department agent will inspect the material and the shipping container and seal it. At this point, the container with the prepared materials is sent to a freight forwarder. The Taxpayer asks if any exemption from the Virginia sales or use tax applies to materials in international commerce.
RULING
Virginia Code § 58.1-610 A treats any person who performs construction services with respect to real estate and furnishes tangible personal property to affix to such real estate as the taxable user or consumer of the tangible personal property. Also see Title 23 Virginia Administrative Code (VAC) 10-210-410 A.
An exception to the above taxable treatment is set out in Va. Code § 58.1-609.3 1. This statute provides an exemption from the retail sales and use tax for:
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- Personal property purchased by a contractor which is used solely in another state or in a foreign country, which could be purchased by such contractor for such use free from sales tax in such other state or foreign country, and which is stored temporarily in Virginia pending shipment to such state or country.
As set out in subsection I of Title 23 VAC 10-210-410, a construction contractor may apply to the Department for a certificate of exemption, Form ST-11A. The contractor will need to include information to establish that the construction materials may be purchased by the contractor free from the sales or use tax in the foreign country. In addition, the Department has previously ruled that a value-added tax (VAT) that is commonly imposed in many foreign countries is not similar to the Virginia retail sales and use tax. See Public Document 08-156 (8/29/08). Accordingly, if the foreign country imposes a VAT but no sales tax, the contractor may purchase construction materials free from the Virginia retail sales and use tax.
Because Va. Code § 58.1-610 treats contractors as consumers, tangible personal property purchased by a construction contractor in Virginia or purchased outside Virginia and shipped into Virginia for use by a real property construction contractor is generally taxable to the contractor although it may subsequently arrange for the purchased materials to be shipped overseas. Furthermore, the resale exemption does not apply to the contractor's purchases of materials for its use or consumption. Nor does the foreign commerce exemption (provided by Va. Code § 58.1-609.10 4) apply to the circumstances in this instance because the contractor is taking possession of the materials in Virginia and Virginia law imposes the tax on such contractor's purchases, unless it is established that the purchases qualify for the exemption provided by Va. Code § 58.1-609.3 1.
CONCLUSION
This response is based on the facts presented as summarized above. Any change in facts or the introduction of new facts may lead to a different result.
The Code of Virginia sections, regulation and public document cited are available online at www.tax.virginia.gov in the Laws, Rules and Decisions 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 *****.
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- Sincerely,
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- Craig M. Burns
Tax Commissioner
- Craig M. Burns
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AR/1-5052431565.R
Rulings of the Tax Commissioner