Tax Type
Retail Sales and Use Tax
Description
Purchases and sales by property management service
Topic
Collection of Tax
Exemptions
Date Issued
07-31-1986
July 31, 1986
Re: Ruling Request/ Sales and Use Tax
Dear ***************
This will reply to your letter of May 20, 1986 seeking a ruling on the correct application of the sales and use tax to certain transactions involving ************* (taxpayer).
FACTS
In connection with its property management business, taxpayer purchases certain items, such as refrigerators, stoves, etc., for installation by its maintenance department in properties owned by related persons and located within one or more of its projects. Taxpayer then charges the appropriate project for such items together with a handling charge.
Taxpayer requests a ruling whether the department would consider it to be a retailer for purposes of these transactions and therefore require it to purchase such items pursuant to resale certificates of exemption (and then collect and report the tax in making sales of such items to its projects); or whether it may just pay the tax on such items at the time of purchase from suppliers.
RULING
§58.1-603 of the Virginia Code imposes the tax "on who engages in the business of selling at retail.... tangible personal property in this State [to the extent of the gross sales price of each item or article of tangible personal property sold at retail or distributed in this State."
In addition, §58.1-602(14) of the Code defines "retail sale" or "sale at retail" to mean " a sale to any person for any purpose other than for resale." (Emphasis added) Furthermore, §630-10-95 of the Virginia Retail Sales and Use Tax Regulations defines "sales price" to mean "the total amount for which tangible personal property or taxable services are sold and includes any services in connection with such sale. [However], "sales price" does not include... separately stated charges for repair installation, application or remodeling labor or services." (Emphasis supplied)
Inasmuch as taxpayer's purchases of refrigerators, stoves, etc., in the present case represent sales of tangible personal property for resale to its projects in the ordinary course of taxpayer's business, such purchases qualify for exemption from the retail sales and use tax, and taxpayer should present a certificate of exemption to its dealers at the time of making all such purchases. Therefore, taxpayer must collect and report the tax, based on the total amount charged for such items, including any handling or other charges, at the time of resale of such items to its projects.
However, it should be noted that "[i]f a purchaser who gives an exemption certificate makes any use of the property other than an exempt use... or lease in the regular course of business, the use is treated as a taxable sale by the purchaser at the time the property is first used by him." §630-10-20(D), Virginia Retail Sales and Use Tax Regulations. Therefore, if taxpayer in this case makes any use of items purchased exempt of the tax pursuant to resale certificates of exemption, other than an exempt use, i.e., for resale to its projects, it will be held subject to the tax notwithstanding the validity of the exemption certificate presented to its suppliers at the time it was given.
Furthermore, taxpayer will still be liable for the payment of the tax on all its purchases of administrative items, such as office supplies and equipment, and any other items which are not intended for resale in the ordinary course of business. Please find enclosed a copy of certificate of exemption Form ST-10, for use by taxpayer whenever it makes purchases of any item intended for resale to its projects.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner