Tax Type
Retail Sales and Use Tax
Description
Equipment sold to satellite programming provider exempt of the tax resale exemption certificates.
Topic
Collection of Tax
Exemptions
Sale for Resale
Date Issued
07-05-2013
July 5, 2013
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the "Taxpayer") in which you seek correction of the retail sales and use tax assessment issued for the period February 2008 through January 2011. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer operates as a retailer of televisions, television receiving equipment, antennas and satellite equipment. The Taxpayer states that it purchases such equipment exempt of the tax for resale. The Taxpayer entered into a contract with ***** (the "satellite programming provider") to provide services throughout its coverage area for the satellite programming provider's customers. During the audit period, the Taxpayer states that it purchased the equipment from ***** (the "vendor"), exempt of the tax for resale. The Taxpayer further states that the equipment was sold to the satellite programming provider in accordance with the contract. The Taxpayer states that the equipment was sold to the satellite programming provider exempt of the tax pursuant to resale exemption certificates.
DETERMINATION
Contested Purchases
The Taxpayer contests the assessment of tax on its purchases of satellite equipment from the vendor. The Taxpayer maintains that these purchases were properly made exempt of the tax pursuant to a resale exemption certificate.
Virginia Code § 58.1-602 defines retail sale, in pertinent part, as "a sale to any person for any purpose other than for resale in the form of tangible personal property or services taxable under this chapter...."
Virginia Code § 58.1-623 A states:
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- All sales or leases are subject to the tax until the contrary is established. The burden of proving that a sale, distribution, lease, or storage 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.
The tax was assessed in the audit based upon the determination in Public Document (P.D.) 11-71 (5/11/11). Based upon the facts presented and in accordance with the aforementioned authorities, the Taxpayer correctly purchased the equipment, that it subsequently sold to the satellite programming provider exempt of the retail sales and use tax pursuant to a resale exemption certificate. Going forward, the Taxpayer should continue to make the purchases exempt of the tax. Accordingly, the tax assessed in the audit is abated in full. As this decision represents a change in policy regarding this specific fact pattern and related issues, the portion of P.D. 11-71 that deals with transactions of this type is superseded by this determination.
Contested Sales
The Taxpayer contests the assessment of tax in the audit on its sales of equipment to the satellite programming provider. The Taxpayer maintains that it properly sold the equipment exempt of the tax pursuant to valid resale exemption certificates provided by the satellite programming provider.
In P.D. 97-392 (9/29/97), the taxpayer was a satellite programming provider. The taxpayer was assessed in the audit on purchases of satellite equipment that it subsequently sold to its subscribers. Based upon Title 23 of the Virginia Administrative Code (VAC) 10-210-4040, it was determined that the true object of the transaction between the programming provider and its subscribers was to obtain the television programming services rather than the tangible property accompanying the service. Accordingly, the taxpayer was deemed a service provider when it leased, rented or sold equipment in connection with satellite television programming. As the provider of a nontaxable service, it was determined that the taxpayer was subject to the tax on tangible personal property used or consumed in providing its service. This applied to the satellite dishes, converter boxes, and remote control units provided to Virginia customers, and to any other tangible personal property (including installation supplies) used or consumed in Virginia by the Taxpayer.
Virginia Code § 58.1-623 and Title 23 VAC 10-210-280 require the Taxpayer to charge and collect the tax on sales of the equipment at issue unless the Taxpayer takes in good faith from the satellite programming provider a certificate that the sales are exempt under the law. During the audit period, the Taxpayer made sales of equipment exempt of the tax after taking from the satellite programming provider resale exemption certificates. Because the Taxpayer accepted the certificates in good faith based upon its belief that the satellite programming provider accrued the tax on the equipment purchases, the assessment related to these sales is abated in full. In accordance with P.D. 97-392 and P.D. 11-71, the satellite programming provider is deemed the taxable user and consumer of the equipment leased to its customers to provide the programming services. Therefore, going forward the Taxpayer is required to charge and collect the tax from the satellite programming provider on sales of equipment used by the satellite programming provider in the provision of programming to its customers.
CONCLUSION
Based upon this determination, the assessment at issue is abated in full. The Code of Virginia sections, regulations and public documents 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 response, 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
AR/1-4833052963.P
Rulings of the Tax Commissioner