Tax Type
Retail Sales and Use Tax
Description
Seller of credit cards
Topic
Exemptions
Date Issued
06-09-1986
June 9, 1986
Re: Request for Ruling/Sales and Use Tax
Dear *****************
This will reply to your letter of May 1, 1986, in which you request a ruling on the applicability of the sales and use tax to certain transactions.
FACTS
Your client is engaged in the sale of credit cards, teller machine cards, identification cards, and similar products to banks and other institutions. Your client ordinarily will deliver its products directly to a customer or at the direction of the customer will mail the products directly to the customer's cardholders. When a customer decides to have cards mailed directly to its cardholders, the service may be performed either by your client or by an independent mailing house.
You wish to determine if your client will be required to collect the sales tax from its customers (l) when products are delivered directly to out-of-state customers, (2) when products are placed in the mail by your client for delivery to the out-of-state cardholders of a customer, (3) when products are delivered to a mailing house for placement in the mail to the out-of-state cardholders of a customer, and (4) when products are purchased by a "middleman" for resale to banks or other institutions.
RULING
§ 58.1-608.20 of the Code of Virginia exempts from the sales and use tax the "[d]elivery of tangible personal property outside the Commonwealth for use or consumption outside the Commonwealth." Interpreting this statute, § 630-10-51 of the Virginia Retail Sales and use Tax Regulations provides that sales qualifying for the exemption include those whereby delivery is made to he purchaser outside of Virginia in the seller's vehicle, by an independent trucker or contract carrier hired by the seller, or by the U. S. Post Office or a common carrier.
Based upon the foregoing, your client would not be required to collect the sales tax from an out-of-state customer when delivery of the products sold is made to the customer outside of Virginia by one of the means listed above. Collection of the tax would be required, however, when at the direction of a customer your client places the products in the mail for delivery to the cardholders of the customer. In such an event, there is no sale in interstate commerce as the delivery is not to the purchaser but to its cardholders.
Your client will also be required to collect the sales tax when it delivers products to as mailing house located in Virginia, which will in turn place the products in the mail for delivery to the cardholders of a customer. In such an event the deliver of goods to the mailing house is, tantamount to delivery to the purchaser. Because the delivery is not one in interstate commerce, the exemption does not apply. However, if your client delivers its products to a mailing house located outside of Virginia for subsequent delivery to a customer's cardhoIders, the interstate commerce exemption does apply.
Your client need not collect the sales tax from a "middleman" who purchases products for resale to banks or other institutions, provided that the middleman furnishes your client with a valid resale certificate of exemption. For your information, I have enclosed a copy of § 630-10-20 of the Virginia Retail Sales and Use Tax Regulations, which explains the proper use of exemption certificates.
I trust that this will answer the questions posed in your letter. If further questions arise, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner