Tax Type
Retail Sales and Use Tax
Description
International driving documents
Topic
Taxability of Persons and Transactions
Date Issued
01-03-1986
January 3, 1986
Re: §58.1-1821 Application/Sales and Use Tax
Dear ***************
This will reply to your letter of September 23, 1985, and additional information submitted, dated December 9, 1985, requesting correction of an assessment issued in the above referenced case.
FACTS
In connection with its function as an automobile club, *********** (Taxpayer) purchases from the ************** Automobile Association, Inc., its national representative, certain ************** (IDP's). Taxpayer then issues such IDP's to individuals (for a nominal fee) in accordance with regulations promulgated by the U. S. Department of State. While possession of such an IDP is not required to drive in all countries, it is an internationally recognized document.
Taxpayer contests the imposition of use tax on its purchases of such IDP's from its national representative on the grounds that such purchases are made solely for resale to the ultimate consumer. Alternatively, taxpayer contends that such purchases should not-be subject to the tax, since they are not items of tangible personal property.
DETERMINATION
§58.1-604 of the Virginia Code levies a tax upon the use or consumption of tangible personal property in this state computed on the cost price of such item(s).
§58.1-602(19) of the Code defines "Tangible personal property" to mean, "personal property which may be seen weighed, measured, felt, or touched, or is in any other manner perceptible to the senses. The term "tangible personal property" shall not include stocks, bonds, notes, insurance or other obligations or securities."
Furthermore, Section 630-10-97.1 of the Regulations provides in pertinent part that, "[i]n determining whether a particular transaction which involves both the rendering of a service and the provision of tangible personal property constitutes an exempt service or a taxable retail sale, the "true object" of the transaction must be examined." That is, "[i]f the object of the transaction is to secure a service and the tangible personal property which is transferred to the customer is not critical to the transaction, then the transaction may constitute an exempt service. However, if the object of the transaction is to secure the property which it produces, then the entire charge, including services provided, will be taxable."
The true object of the purchases by taxpayer from its national representative in the present case, is the acquisition of the forms and/or documents (i.e., the tangible personal property) necessary to enable it to issue the IDP's to individual applicants.
Therefore, while the use and issuance of such IDP forms and documents is regulated by an agency of the U. S. Government, they are not unlike any other taxable materials and supplies purchased by taxpayer to provide a full range of services to its members and the driving public generally.
Conversely, the true object of the individual applicant in purchasing such an IDP from taxpayer is not so much the piece of paper ultimately issued, as the international driving recognition that such piece of paper represents. This situation is analogous to licenses issued to members of regulated professions, such as doctors, lawyers and nurses.
Based on all the foregoing, I find no basis for correction of the assessment.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner