Tax Type
Retail Sales and Use Tax
Description
Demonstrator motor vehicles
Topic
Exemptions
Date Issued
07-02-1986
July 2, 1986
Re: Request for Ruling/Sales and Use Tax
Dear **************************
This will reply to your letter of June 13, 1986, in which you request a ruling on the applicability of the retail sales and use tax to equipment added to demonstrator vehicles as a condition of sale.
You note in your letter that motor vehicle dealers often must add equipment, such as a radio, tape deck, or air conditioner, to a motor vehicle as a condition for its purchase by a customer. Such equipment may be added to a vehicle held exclusively for sale or to a vehicle that has previously been used as a demonstrator.
Section 630-10-67.C of the Virginia Retail Sales and Use Tax Regulations provides that "[t]he...tax does not apply to...accessories...installed on a motor vehicle before or at the time of sale...that are included in the sales price for measuring the motor vehicle sales and use tax or the retail sales and use tax." Furthermore, the regulation provides that such accessories "may be purchased by a dealer...of motor vehicles under a Resale Exemption Certificate." Not exempt under the regulation, however, are accessories "purchased for installation on motor vehicles not held for sale." Such vehicles include demonstrators, which ordinarily are driven by employees of a dealership.
Under the above regulation, equipment installed on a vehicle held exclusively for sale would be nontaxable to the dealership, provided that the equipment is included in the sales price of the vehicle. The same also holds true for equipment installed on a vehicle that has been withdrawn from service as a demonstrator in order to ready that vehicle for immediate sale. However, if equipment is installed on a vehicle that will remain in use as a demonstrator, the tax will apply under Regulation Section 630-10-67.C.
I trust that this will answer the question posed in your letter. If you have any further questions or concerns, please do not hesitate to contact the department.
Sincerely,
W.H. Forst
Tax Commissioner
Rulings of the Tax Commissioner