Tax Type
Retail Sales and Use Tax
Description
Use tax; Credit for taxes paid to another state
Topic
Rate of Tax
Date Issued
07-02-1985
July 2, 1985
Re: §58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply to your letter of June 13, 1985, in which you resubmit an application for correction of sales and use tax assessed to *****.
It is my understanding that all of the tangible personal property assessed in the department s audit of your client was purchased from suppliers in Virginia and other states and delivered by the suppliers to a site in Virginia. Even though most of the property delivered in Virginia was later transported into Maryland or the District of Columbia, the first use of the property occurred in Virginia, rendering the property subject to the use tax here. As your client erroneously remitted tax to Maryland, rather than Virginia, in many instances, refunds of tax paid to that state were sought. After a portion of the refund sought was denied by the Maryland Comptroller of the Treasury, your client sought credit under Virginia law for taxes paid to, but not refunded by Maryland.
As noted in my April 19, 1985 determination, the credit granted in Section 58.1-611 of the Code of Virginia for tax paid to other states has been interpreted by the department as being applicable only when taxes were rightfully paid upon the purchase or taxable use of tangible personal property in another state prior to the taxable importation of the property into Virginia. From my analysis of the refund audit working papers prepared by the Maryland Comptroller of the Treasury, it appears that the transactions for which refunds were denied fell into two categories. First, refunds of tax were denied in instances where delivery of tangible personal property occurred outside Maryland, but where the property was later imported into Maryland. In such instances the only tax imposed by Maryland was a one percent use tax to compensate for the difference between the five percent Maryland tax and the four percent Virginia state and local tax. Second, refunds were denied when tangible personal property was delivered for first taxable use in Maryland. In such instances, the full five percent Maryland tax was due.
Under the above two scenarios, I readily see no basis for granting a credit to your client for the tax deemed proper by Maryland tax officials. In the first situation, delivery of tangible personal property occurred in Virginia, rendering the property taxable here. As the Maryland tax in question became due after the taxable event in Virginia, credit is not available under Virginia Code Section 58.1-611. I do not find the 1962 Maryland Court of Appeals decision cited in your letter, Lane Construction Corporation v. Comptroller, 228 Md. 90, 178 A.2d 9O4, to be persuasive here in support of your argument. The Court s opinion merely stood for the proposition that Maryland could constitutionally impose its use tax on property imported into the state after use elsewhere, a decision which would tend t o reinforce the department s position here. In the second situation, the first taxable use of tangible personal property occurred in Maryland so a credit would be available under Virginia Code Section 58.1-611; however, it is my understanding that such transactions were not included in the department's audit. In the event that tangible personal property which your client took actual delivery to in Maryland or which your client paid tax to Virginia supplier or was inadvertently included in the department s audit, I will provide your client with 45 days to identify such transactions and present information to the department s Technical Services Section, P.O. Box 6-L, Richmond, VA 23282. Absent the provision of such information or the inclusion in the audit of any transactions occurring in Maryland or for which tax was already paid to Virginia, the instant assessment shall be deemed immediately due and payable.
Sincerely,
W. H. Forst
Tax Commissioner
Re: §58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply to your letter of June 13, 1985, in which you resubmit an application for correction of sales and use tax assessed to *****.
It is my understanding that all of the tangible personal property assessed in the department s audit of your client was purchased from suppliers in Virginia and other states and delivered by the suppliers to a site in Virginia. Even though most of the property delivered in Virginia was later transported into Maryland or the District of Columbia, the first use of the property occurred in Virginia, rendering the property subject to the use tax here. As your client erroneously remitted tax to Maryland, rather than Virginia, in many instances, refunds of tax paid to that state were sought. After a portion of the refund sought was denied by the Maryland Comptroller of the Treasury, your client sought credit under Virginia law for taxes paid to, but not refunded by Maryland.
As noted in my April 19, 1985 determination, the credit granted in Section 58.1-611 of the Code of Virginia for tax paid to other states has been interpreted by the department as being applicable only when taxes were rightfully paid upon the purchase or taxable use of tangible personal property in another state prior to the taxable importation of the property into Virginia. From my analysis of the refund audit working papers prepared by the Maryland Comptroller of the Treasury, it appears that the transactions for which refunds were denied fell into two categories. First, refunds of tax were denied in instances where delivery of tangible personal property occurred outside Maryland, but where the property was later imported into Maryland. In such instances the only tax imposed by Maryland was a one percent use tax to compensate for the difference between the five percent Maryland tax and the four percent Virginia state and local tax. Second, refunds were denied when tangible personal property was delivered for first taxable use in Maryland. In such instances, the full five percent Maryland tax was due.
Under the above two scenarios, I readily see no basis for granting a credit to your client for the tax deemed proper by Maryland tax officials. In the first situation, delivery of tangible personal property occurred in Virginia, rendering the property taxable here. As the Maryland tax in question became due after the taxable event in Virginia, credit is not available under Virginia Code Section 58.1-611. I do not find the 1962 Maryland Court of Appeals decision cited in your letter, Lane Construction Corporation v. Comptroller, 228 Md. 90, 178 A.2d 9O4, to be persuasive here in support of your argument. The Court s opinion merely stood for the proposition that Maryland could constitutionally impose its use tax on property imported into the state after use elsewhere, a decision which would tend t o reinforce the department s position here. In the second situation, the first taxable use of tangible personal property occurred in Maryland so a credit would be available under Virginia Code Section 58.1-611; however, it is my understanding that such transactions were not included in the department's audit. In the event that tangible personal property which your client took actual delivery to in Maryland or which your client paid tax to Virginia supplier or was inadvertently included in the department s audit, I will provide your client with 45 days to identify such transactions and present information to the department s Technical Services Section, P.O. Box 6-L, Richmond, VA 23282. Absent the provision of such information or the inclusion in the audit of any transactions occurring in Maryland or for which tax was already paid to Virginia, the instant assessment shall be deemed immediately due and payable.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner