June 25, 2015
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This will reply to your letter in which you request an abatement and refund of the retail sales and use taxes paid on an all terrain vehicle (the "ATV") included in the Department's audit assessment issued to ***** (the "Taxpayer") for the period November 2011 through February 2014. I note that the Department's assessment has been paid in full. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer primarily operates as a contractor and developer of housing units. The Department's audit disclosed that the Taxpayer made purchases without payment of the sales tax to vendors or the accrual and payment of the use tax to the Department. At issue is the Taxpayer's purchase of an ATV for use on the Taxpayer's farm. The Department's auditor held the ATV subject to the use tax because it appeared that the Taxpayer's use of the ATV was for non-agricultural purposes and thus taxable. The Taxpayer, while in agreement with the audit results, disagrees with the application of the tax to the ATV. Accordingly, the Taxpayer seeks a refund of the tax and interest assessed and paid on the ATV purchase.
DETERMINATION
The Taxpayer contends that the ATV serves a number of functions such as spraying herbicides to eliminate weed growth in cattle grazing pastures, hauling minerals and additional feed to cattle, herding cattle, and moving feed troughs, cattle feeders and other equipment to various pastures. The Taxpayer contends that these functions and other functions such as cattle inspections qualify the ATV for exemption from the use tax.
Virginia Code § 58.1-609.2 1 provides an exemption from the retail sales and use tax for:
Commercial feeds; seeds; plants; fertilizers; liming materials; breeding and other livestock; semen; breeding fees; baby chicks; turkey poults; rabbits; quail; llamas; bees; agricultural chemicals; fuel for drying or curing crops; baler twine; containers for fruit and vegetables; farm machinery; medicines and drugs sold to a veterinarian provided they are used or consumed directly in the care, medication, and treatment of agricultural production animals or for resale to a farmer for direct use in producing an agricultural product for market; tangible personal property, except for structural construction materials to be affixed to real property owned or leased by a farmer, necessary for use in agricultural production for market and sold to or purchased by a farmer or contractor; and agricultural supplies provided the same are sold to and purchased by farmers for use in agricultural production, which also includes beekeeping and fish, quail, rabbit and worm farming for market. [Emphasis added.]
Based on a review of the functions in which the ATV is used, the ATV qualifies for the agricultural exemption cited above. Accordingly, the Department's assessment will be revised and a refund of the tax and interest will be issued.
The Code of Virginia section cited is available on-line in the Laws, Rules and Decisions section of the Department's website located at www.tax.virginia.gov. If you have any questions regarding this matter, please contact ***** of the Department's Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-5769013129.Q