Tax Type
Retail Sales and Use Tax
Description
Commercial airline; Provision of terminal and ground services
Topic
Exemptions
Date Issued
07-31-1986
July 31, 1986
Re: Request for Ruling/Sales and Use Tax
Dear *****************
This will reply to your letter of May 23, 1986, in which you request a ruling on the applicability of the sales and use tax to various transactions involving the provision of terminal and ground services for commercial airlines.
Sections 58.1-603 and 58.1-604 of the Code of Virginia impose the sales and use tax upon the sale, lease, or other use of tangible personal property and selected services. The only true service subject to the tax under those statutes is the furnishing of hotel, motel, and similar accommodations. The sales and use tax is generally computed based upon the "sales price" of the tangible personal property sold. Virginia Code Section 58.1-602.17 defines the term "sales price" as "the total amount for which tangible personal property or services are sold, including any services that are a part of the sale...without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any other deductions whatsoever."
Based upon the foregoing, those transactions that do not entail the provision of tangible personal property to customers and are in no manner connected to the sale of tangible personal property are excluded from the tax. In applying the above provisions to the transactions involving your corporation, I find that charges for aircraft loading and unloading, baggage make up, aircraft marshalling and push out, cabin cleaning, janitorial services, passenger ticketing, skycap services, and freight handling are nontaxable.
For those transactions that entail both the sale of tangible personal property and the provision of services, one must look to the "true object" of the transaction to determine if the tax applies. The true object test, set forth by the Virginia Supreme Court in WTAR v. Commonwealth, 217 Va. 877, 234 S.E.2d 245 (1977), and explained in Section 630-10-97.1 of the Virginia Retail Sales and Use Tax Regulations, requires one to determine if the true object of the purchaser is to obtain the services of the seller or the tangible personal property produced by or furnished with the service. If the true object is the property, the tax applies, but if the true object is the services, the transaction is exempt.
In applying the true object test, I find that charges for lavatory and water services are subject to the tax as the true object of the customer is to obtain tangible personal property, water, for use on airline flights. Nor do I find the tangible personal property furnished under the transaction to be "used directly" in the rendition of an airline's common carrier service so as to be exempted from the tax by virtue of Virginia Code Section 58.1-608.26. Charges for deicing and airstart services would be exempt from the tax, however. In seeking deicing services, the true object of the customer is the removal of ice and snow from its aircraft, not the tangible personal property used in the operation. The same is true with respect to airstart services, in which the true object of the customer is to have an aircraft engine started, rather than the pneumatic power actually used to perform the service. Lastly, charges for providing electricity or ground power service to aircraft are specifically exempted from the tax by Virginia Code Section 58.1-608.8. This statute provides an exemption for "electricity ...when delivered to consumers through...lines."
I trust that this will answer all of the questions posed in your letter. Please do nor hesitate to contact the department if further questions arise.
Sincerely
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner