Tax Type
Retail Sales and Use Tax
Description
Taxpayer provides secure transportation of its customer's currency
Topic
Exemptions
Taxability of Persons and Transactions
Taxable Income
Date Issued
10-24-2013
October 24, 2013
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the "Taxpayer") in which you request a ruling regarding the application of the retail sales and use tax to safes provided to the Taxpayer's customer in the provision of its services. I apologize for the delay in responding to your correspondence.
FACTS
The Taxpayer provides armored car services to its customers. The Taxpayer has begun providing a new service to its customers that includes the use of a safe by the customer in addition to the associated armored car services to securely transport the customer's currency, and cash management services to properly deposit the currency according to the customer's instructions. The safe is drop shipped directly to the customer's place of business by the manufacturer.
The Taxpayer states that the agreement between the Taxpayer and its customer is a long-term contract. The Taxpayer further provides that the contract does not state that the safe is being rented or leased, rather the contract allows for the use of the safe by the customer. Title to the safe remains with the Taxpayer throughout the terms of the contract, with the intention of the Taxpayer to recover the safe when the contract ends. The Taxpayer invoices the customer a single charge that includes the use of the safe in conjunction with secure armored transportation and case management services.
The Taxpayer is paying the sales tax or accruing and remitting the use tax on the purchase of the safe. The Taxpayer questions whether it should include the tax paid on the purchase of the safe in the single charge to the customer.
RULING
Virginia Code § 58.1-609.5 1 provides, in pertinent part that the retail sales and use tax does not apply to "[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made...."
Title 23 of the Virginia Administrative Code (VAC) 10-210-4040 A states, "[c]harges for services generally are exempt from the retail sales and use tax. However, services provided in connection with sales of tangible personal property are taxable." The regulation further provides that "[t]ransactions involving both the sale of tangible personal property and the provision of services generally are either taxable or exempt on the full amount charged, regardless of whether the charges for the service and property components are separately stated... the true object test is used to determine the taxability of these transactions."
Title 23 VAC 10-210-4040 D states:
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- In order to determine whether a particular transaction which involves both the rendering of a service and the provision of tangible personal property constitutes an exempt service or a taxable retail sale, the "true object" of the transaction must be examined. If the object of the transaction is to secure a service and the tangible personal property which is transferred to the customer is not critical to the transaction, then the transaction may constitute an exempt service. However, if the object of the transaction is to secure the property which it produces, then the entire charge, including the charge for any services provided, is taxable.
In this instance, the Taxpayer is deemed to be providing an exempt service when it provides secure transportation of its customer's currency. The use of the safe by the customer is an extension of the security and transportation services provided by the Taxpayer to its customer. The true object of the transaction between the Taxpayer and its customer is the provision of an exempt service, i.e., the secured transportation of currency. Accordingly, the use of the safe by the Taxpayer's customer is not subject to the retail sales and use tax. However, the Taxpayer is deemed the user and consumer of the safe used in the provision of the exempt service. As such, the Taxpayer is liable for the tax on the purchase of the safes at issue.1.
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 Code of Virginia section, regulation and public document cited are available on-line 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 response, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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Craig M. Burns
Tax Commissioner
AR/1-5371157279.P
1. See, Public Document 12-185 (11/15/12).
Rulings of the Tax Commissioner