Tax Type
Motor Vehicle Fuel Sales Tax
Description
Common carrier vs. contract carrier
Topic
Exemptions
Date Issued
09-18-1986
September 18, 1986
Re: Ruling Request/ Motor Vehicle Fuel Sales Tax
Dear ********************
This will reply to your letter of July 28, 1986 seeking a ruling to expand the definition of a "common carrier" for motor vehicle fuel sales tax purposes to include contract and other carriers of Property by motor vehicle.
§58.1-608(10) of the Virginia Code provides, in pertinent part, that the retail sales and use tax does not apply to "tangible personal property sold or leased to a public service corporation engaged in business as a common carrier of property or passengers by motor vehicle .., for use or consumption by such common carrier directly in the rendition of its public service."
In addition, §630-10-24.3 of the Virginia Retail Sales and Use Tax Regulations, (copy enclosed), explains that in order to qualify for this exemption, "a common carrier must be authorized to operate under a certificate of convenience and necessity issued by the State Corporation Commission or the Interstate Commerce Commission." This section provides further that the exemption "applies only to common carriers of property by motor vehicle, including restricted common carriers, and has no application to contract or other carriers." (emphasis supplied)
In accord with all of the above is §13 of the Virginia Motor Vehicle Fuel Sales Tax Regulations, (copy enclosed), which provides that, "[t]he tax applies to all retail sales of motor vehicle fuel to a contract carrier whereby delivery of such fuel is made within a transportation district."
While the term "common carrier" is nowhere specifically defined in Title 58.1 of the Virginia Code, §56-273, et seq., of the Code governing Public Service Companies which are also motor vehicle carriers delineate in considerable detail the distinguishing features of common carriers of property by motor vehicle.
Based on the foregoing, and in accordance with the well settled principle of strict construction of all sales tax exemptions, only that fuel used directly in the rendition of common carrier or restricted common carrier operations would qualify for exemption from the motor vehicle fuel sales tax, if purchased under a properly completed Certificate of Exemption (Form ST-20). All other fuel not used directly in the rendition of common carrier service would not qualify for exemption and would therefore be subject to the tax at the time of purchase. Furthermore, in cases where it cannot be determined at the time of purchase by a common carrier whether all the fuel being purchased will be used directly in the rendition of a common carrier operation, the fuel may be purchased exempt of the tax: In such cases, the common carrier would be required to register with the department to report the tax on the cost price of all fuel not used directly in the rendition of its common carrier operation.
It should be noted that the department developed the above referenced regulations in consultation with representatives of the motor carrier industry and in heavy reliance on the State Corporation Commission's policies regarding common and contract carriers. Accordingly, the regulations reflect the very real and substantial differences which exist between common and contract carriers, such as the higher degree of regulation and control exercised by the S.C.C. over common and restricted common carriers by motor vehicle. In addition, the department's regulations were developed to be of general application to the wide variety of transactions which might be engaged in by common and contract carriers.
Therefore, while I am not unsympathetic with the adverse economic consequences of the decision to impose this type of regional tax on certain retailers, such as service station operators and truck stops located in border jurisdictions, I find no basis in Virginia law to expand the definition of common carrier to include contract or other carriers of property by motor vehicle. To hold otherwise, based on the facts of this particular case, would have much broader negative implications for the department's administration of the general retail sales and use tax.
It is also the department's understanding that neither the Motor Fuel and Special Fuel Tax, administered by the Department of Motor Vehicles, nor the Road Tax, administered by the State Corporation Commission, provide any tax preferences or exemptions to contract or other carriers of property by motor vehicle.
I hope this has answered your question but please let me know if I may be of further assistance.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner