Tax Type
Retail Sales and Use Tax
Description
Motor vehicle service contracts
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
02-25-1987
February 25, 1987
Re: §58.1-1821 Application/ Sales and Use Tax
Dear******************
This refers to my determination letter dated March 14. 1986 to ********** ("taxpayer"), in the above referenced case.
Based on information recently received from the State Corporation Commission's Bureau of Insurance, it has been determined that a portion of my March 14 determination letter was incorrect when issued. According to the Bureau of Insurance, none of the vehicle service contracts issued by the taxpayer through the companies mentioned in the March 14 letter, represent contracts of insurance subject to regulation by the State Corporation Commission.
This is true, according to the Bureau of Insurance. since when a seller, dealer, or manufacturer is identified in a vehicle service contract as the party guaranteeing against the specified breakdowns, such seller, dealer or manufacturer is generally not required to be licensed with the Bureau, notwithstanding that such contract may be issued through an insurance agent or underwritten by an insurance company which is licensed with the Bureau.
Therefore, to the extent that the March 14 letter stated that vehicle service contracts issued by the taxpayer through either ******** Corporation or ***********Company qualified for exemption from the tax, it is hereby rescinded.
Accordingly, effective March 1, 1987. the sales price of vehicle service contracts issued by the taxpayer through any of the companies named in my March 14, 1986 letter. is subject to Virginia's retail sales and use tax, (currently at a rate of four and one-half percent), at the time of sale to customers, and the taxpayer should report such tax collected to the department in filing its monthly retail sales and use tax return.
In addition. based on the taxpayer's good faith reliance on my March 19, 1986 letter, those vehicle service contracts issued by the taxpayer through either********** Corporation or ******************* Company between the dates of March 14, 1986 and February 28, 1987 will not be deemed subject to the tax. However. contracts sold on or after March 1. 1987 will be subject to the tax and audited as such in future audits.
I regret any inconvenience which may be occasioned by this correction to my March 14, 1986 letter.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner