Tax Type
Retail Sales and Use Tax
Description
Manufacturing
Topic
Appropriateness of Audit Methodology
Date Issued
10-19-1982
October 19, 1982
Re: § 58-1118 Application/Sales and Use Tax
Dear ***************
This letter will reply to your correspondence of June 2, 1982 in which you apply for relief of assessment of sales taxes assessed against your client, ******* as the result of an audit covering the period March 1, 1979 through June 30, 1981.
Facts
******* operated in Roanoke for over 37 years as a retail merchant in the business of selling custom cut glass. It has never repaired glass, it only sells new glass cut to the specifications of given customer, and occasionally installs the glass ******* purchases stacks of glass and as each customer order comes in, a sheet of glass from the proper rack for size and type is taken to a cutting table for measuring, marking, and cutting to the customer's specification. The stacking of glass is done by a forklift, but all other work on the glass is done manually ******* generally makes table tops, shelves, window glass, some windshield and other auto glass, some storm windows, plate glass, mirrors, insulated windows, safety glass, and plexiglass. The work is all done according to customer specifications; there is no assembly line type operation. Nor is there a finished product inventory once the glass is cut and finished the customer takes possession of the glass and occasionally ****** stalls it on the customer's property.
Determination
The sales and use tax exemption allowed in § 58-441.6 of the Code of Virginia provides an exemption for:
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- "...industrial materials for future processing, manufacturing, refining, or conversion into articles of tangible personal property for resale where such industrial materials either enter into the production of or become a component part of the finished product; nor shall such terms include industrial materials that are coated upon or impregnated into the product at any stage of its processing, manufacture, refining or conversion for resale; nor shall such terms include machinery or tools or repair parts therefor or replacements thereof, fuel, power, energy, or supplies, used directly in processing, manufacturing, refining, mining or conversion of products for sale or resale; nor shall such terms include materials, containers, labels, sacks, cans, boxes, drums or bags for future use for packaging tangible personal property for shipment or sale."
- "...industrial materials for future processing, manufacturing, refining, or conversion into articles of tangible personal property for resale where such industrial materials either enter into the production of or become a component part of the finished product; nor shall such terms include industrial materials that are coated upon or impregnated into the product at any stage of its processing, manufacture, refining or conversion for resale; nor shall such terms include machinery or tools or repair parts therefor or replacements thereof, fuel, power, energy, or supplies, used directly in processing, manufacturing, refining, mining or conversion of products for sale or resale; nor shall such terms include materials, containers, labels, sacks, cans, boxes, drums or bags for future use for packaging tangible personal property for shipment or sale."
In determining whether an operation is industrial or not, the department has looked to several criteria, specifically the existence of a highly mechanized assembly line, plant size, inventory size, capital investment, and number of employees. The Virginia Supreme Court, in Commonwealth v. Orange Madison Cooperative (220 Va. 655, 261 S.E. 2d 532, 1980) implicitly validated the use of this criteria. Based on the information furnished the department, it would appear that would not meet the industrial test. Accordingly, ********* is not exempt from the tax and there is no reason to adjust the auditor's findings. Therefore, relief cannot be granted.
It is our understanding that your question with respect to capital not otherwise taxed has been resolved.
If the taxpayer would like a conference with me, it must be requested within thirty (30) days. If I do not hear from you, upon expiration of thirty (30) days, this determination will become final.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner