Tax Type
Retail Sales and Use Tax
Description
Membership materials; Consumer use tax
Topic
Taxability of Persons and Transactions
Date Issued
04-29-1986
April 29, 1986
Re: Virginia Code §58.1-1821 Application
Sales and Use Tax
Dear ****************
This will reply to your letter of January 6, 1986 in which you apply, on behalf of your client ********** for the correction of the assessment which resulted from the department's recent sales and use tax audit.
FACTS
***********************************. You protest the imposition of the consumer use tax on purchases made by League of tangible personal property, such as membership pins, cards, plaques and other materials which are distributed to various state League, chapters. These materials are distributed by League, without charge, to these various state chapters. The materials are ultimately distributed by the state chapters to the dues-paying members in these chapters.
Your client failed to remit consumer use tax on the purchase of these materials; maintaining that these purchases are not subject to tax pursuant to Virginia Code §58.1-608.20.
DETERMINATION
In the application for correction, you rely on Virginia Code §58.1-608.20, which provides an exemption from the use tax for the "(d)elivery of tangible personal property outside the Commonwealth for use or consumption outside the Commonwealth." This Code Section is further amplified in §630-10-51 of the Virginia Retail Sales and Use Tax Regulations, which provide in subsection A that "(a) sale in interstate or foreign commerce occurs only when title or possession of the property being sold passes to the purchaser outside of Virginia and no use of the property is made within Virginia. (Emphasis added.) This exemption is only intended to exempt the first "use" of such property when such use occurs outside of Virginia. This is supported by subsection B of this Regulation which states that "... the tax applies to the first use in Virginia of tangible personal property purchased elsewhere in a transaction which would have been taxable had the transaction occurred in Virginia, regardless of the fact that such property may have been, or may be used in interstate commerce..."
This regulation is consistent with the Virginia Supreme Court decision in Commonwealth of Virginia. Department of Taxation v. Miller-Morton Company, 220 Va. 852 (1980). The Court ruled that the exemption for delivery of property outside Virginia for use outside Virginia applies to the act of delivery, not the holding of goods in Virginia for delivery outside of Virginia. Furthermore, if a taxable event occurs in Virginia, subsequent out of state delivery does not exempt it from the tax.
Under Virginia Code §58.1-602, the use tax is imposed "... upon the use, consumption, distribution, and storage as herein defined." "Use" is defined as "... the exercise of any right or power over tangible personal property incident to the ownership thereof.." "Storage" is defined as "... any keeping or retention of tangible personal property for use, consumption or distribution in this State, or for any purpose other than sale at retail in the regular course of business." Based upon the facts as presented, League by its purchase, storage in Virginia and subsequent distribution of the materials to its state chapters, is making "use" of the contested materials in this State.
This determination is consistent with a previous ruling dated April 11, 1984 (copy attached). Therefore, based upon the foregoing, your application for correction is denied.
Sincerely,
W. H. Forst
Tax Commissioner
Related Documents
Rulings of the Tax Commissioner