Tax Type
Retail Sales and Use Tax
Description
Check sales; Ordering charges; Sales price
Topic
Taxability of Persons and Transactions
Date Issued
05-08-1984
May 8, 1984
Re: Ruling Request: Sales and Use Tax
Dear *********************
This will reply to your letter of December 20, 1983 concerning the application of sales and use tax to a charge for processing orders of checks ant whether sale of checks by a savings and loan association requires its registration as a dealer.
Facts
***** ("Taxpayer") buys checks for its customers. Taxpayer pays sales tax on the checks and passes the tax on to the customer along with a ***** service charge, per order, to cover Taxpayer's administrative costs of processing the orders and acquiring checks for its customers.
Determination
Sales price, upon which sales and use tax is imposed, is defined in § 58-441.3(b) of the Code of Virginia as the total amount for which tangible personal property or services are sold, including any services that are a part of the sale. § 58-441.3(b) expressly excludes from sales price certain service charges, such as amounts separately charged for services rendered in installing, applying or remodeling or repairing property sold, or finance charges, carrying charges, service charges or interest from credit extended on sales of tangible personal property under conditional sale contracts or other conditional contracts providing for deferred payments of the purchase price. Service charges to cover administrative costs do not come within the exclusion and only those services expressly stated are exempt.
Virginia Code § 58-441.6(a) also exempts from sales and use tax professional or personal service transactions which involve sales as inconsequential elements for which no separate charges are made. The provision of checks is not an inconsequential element of the service provided by Taxpayer; rather, it is the reason that the administrative costs are incurred for which the ***** service charge is imposed. In addition, Virginia Retail Sales and Use Tax Regulations 1-97.1 provides that the tax does apply to the charge for any services included in the sale of tangible personal property. The service charge would not be imposed had checks not been ordered so the service of processing the order is clearly included in the sale of the checks. Accordingly, the service charge is subject to the tax.
Because Taxpayer does engage in selling tangible personal property to its customers, it is required to register as a dealer and collect and pay the tax due to the Department (Virginia Sales and Use Tax Regulations 1-95.1). It is true that taxable sales in Virginia Sales and Use Tax Regulations 1-12 expressly includes sales of checks and checkbooks whereas 1-95.1 does not enumerate types of property subject to the tax. However, at the time 1-95.1 was promulgated, savings and loan associations were not permitted to have checking accounts so the omission of checks from the language has no significance. § 1-95.1 does not exempt from registration, expressly or implicitly, a savings and loan association which sells checks to its customers.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner