Tax Type
Retail Sales and Use Tax
Description
Sales price; Coupons; Use tax
Topic
Collection of Tax
Taxability of Persons and Transactions
Date Issued
12-09-1985
December 9, 1985
Re: §58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply to your letter of October 12, 1984 in which you submit an application for correction of sales and use tax assessed to ***** as the result of a recent audit.
FACTS
***** is engaged in the sale of mattresses at retail. A recent audit of ***** revealed the failure to remit the sales and use tax on purchases of materials used in the conduct of its business, including signs, banners, business cards, credit memorandums, sales books, and forms, and items provided to customers in connection with the sale of other items and included on purchasers' invoices.
***** asserts that it is not the proper party to which the tax should be assessed as the obligation to collect and remit the tax is placed upon the seller and not the purchaser under Virginia law. In addition, ***** asserts that items provided to customers in connection with the sale of other items were included on purchasers' invoices and were therefore included in the purchase price for which ***** had collected the sales tax.
DETERMINATION
During the instant audit period, Section 58-441.4 of the Code of Virginia (recodified as Virginia Code Section 58.1-603 effective January 1, 1985) imposed the sales tax "upon every person who engages in the business of selling at retail or distributing tangible personal property" while Virginia Code Section 58-441.5 (now Virginia Code Section 58.1-604) imposed the use tax "upon the use or consumption of tangible personal property." These are not two separate taxes but "one comprehensive tax on sales," United States v. Forst, 442 F. Supp. 920 (W.D. Va. 1977), aff'd., 569 F. 2d 811(4th Cir. 1978). Similarly, the Virginia Supreme Court held in Commonwealth vs. Miller-Morton, 220 Va. 852, 263 S.E. 2d 413 (1980) that "(t)he use tax...applies if the purchase was made in Virginia but the sales tax was not paid."
Based upon the foregoing, I must conclude that the tax in this case was properly assessed to ***** as the tax may be assessed to either the seller or purchaser under the Virginia sales and use tax law. Furthermore, the federal courts held in United States v. Forst, supra:
Although the seller is legally obligated to collect the tax from the purchaser, the statute makes the tax the legal debt of the purchaser. "....(W)here a state requires that its sales tax be passed on to the purchaser and be collected by the vendor from him this establishes as a matter of law that the legal incidence of the tax falls upon the purchaser." United States v. State Tax Commission of Mississippi, 421 U.S. 599, 607, 95 S. Ct. 1872, 1878 (1975).
Therefore, ***** is the proper party to whom the sales and use tax should be assessed in the instant case.
As to the items provided by ***** to customers in connection with the sale of other items, Virginia Code Section 58-441.4 imposed the tax on the "sales price" of tangible personal property sold in Virginia. The term "sales price" was defined in Virginia Code Section 58-441.3(b) (now Virginia Code Section 58.1-602.17) as the total amount for which tangible personal property is sold, "valued in money, whether paid in money or otherwise." For example, under Section 630-10-27.2 of the Virginia Retail Sales and Use Tax Regulations (Regulation Section 1-27.2 prior to January 1, 1985), items which are purchased, for which a manufacturer's coupon is presented, are valued at the full price listed for the item because the retailer will receive his full retail price, part from the manufacturer and part from the customer. The sales price of an item for which a retailer's coupon is presented, however, is the price listed for the item less the amount of the coupon presented because the coupon is of no value to the retailer as he absorbs the loss resulting from the discount. The coupon merely advertises discounts. Similar reasoning applies when a business such as ***** furnishes an item to the purchaser of another item and lists both items on the purchase invoice. The item furnished is in effect a discount; therefore, the sales price of the transaction includes both the item purchased and the item provided.
Therefore, based upon the foregoing, the assessment issued to ***** will be revised to delete items provided to customers in connection with the sale of other items and which were included on purchase invoices provided to customers.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner