Tax Type
Corporation Income Tax
Description
Fuel oil sales; Heating and air conditioning unit repairs
Topic
Collection of Tax
Taxability of Persons and Transactions
Date Issued
02-20-1987
February 20, 1987
Re: §58.1-1821 Application/ Sales and Use Tax
Dear********************
This will reply to your letter of August 20, 1986 seeking correction of an assessment in the above referenced case for the audit period March 31, 1983 through December 31, 1985.
FACTS
*********** (the taxpayer) is in the business of selling fuel oil. In connection with this business, the taxpayer also repairs and installs central heating and air conditioning units. The taxpayer was audited by the department and held subject to the tax on its untaxed sales of certain fuel oil and on certain purchases of equipment and supplies for its own use or consumption for which it neither paid sales tax to suppliers nor remitted use tax directly to the department.
The taxpayer contests this assessment stating that a portion of the fuel sales held subject to tax in the audit were for "domestic consumption", exempt of the tax under §58.1-608(9) of the Virginia Code. In addition, the taxpayer states that some of the purchases held subject to tax in the audit represented purchases of nontaxable labor or services, exempt of the tax under §58.1-608(2) of the Code.
Furthermore, while not specifically raised as an issue in its application for correction, at the time of the audit the taxpayer objected to the imposition of the tax on its untaxed purchases stating that its vendors were responsible for collection and reporting of such tax to the department.
DETERMINATION
Section 58.1-608(9) of the Virginia Code provides an exemption from the sales and use tax for "artificial or propane gas, firewood, coal or home heating oil used for domestic consumption." Domestic consumption is then defined as the "use of artificial or propane gas, etc., by an individual purchaser for other than business, commercial or industrial purposes." Furthermore, the taxability of fuel purchased is determined by reference to its actual usage. See, e.g., §630-10-40.2(C) of the Virginia Retail Sales and Use Tax Regulations, copy enclosed.
In this connection I have also enclosed a recent ruling of the department outlining in some detail the duties of a dealer making sales of fuel for domestic consumption. This letter provides in pertinent part, that while a dealer is not required to obtain a certificate of exemption for each transaction, if the record of the sale is clearly identifiable as a sale of fuel for domestic consumption, this should not be construed as altering the fact that the burden of proof is on the dealer to demonstrate that each untaxed transaction is legitimately exempt from the tax.
Therefore, the audit will be adjusted in this case to remove those transactions for which the taxpayer is able to provide the department with invoices showing that the fuel deliveries in question were made to residences.
Section 58.1-608(2) of the Virginia Code provides an exemption from the tax for, "[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made, nor services rendered by repairmen for which a separate charge is made." However, §630-10-97.1 of the Regulations provides that the tax does apply to, "any services included in or in connection with the sale of tangible personal property."
In addition, while it is true that the taxpayer's vendors in this case were obligated to collect the tax on their sales to the taxpayer, the department may look to either the vendor or the purchaser for such tax liability. For example, the Fourth Circuit Court of Appeals has held that, "[a]lthough the seller is legally obligated to collect the tax from the purchaser, the statute, [§58.1-625 of the Virginia Code], makes the tax the legal debt of the purchaser." See, United States v. Forst, 569 F. 2d 811, (4th Cir. 1978).
Therefore, as with the untaxed sales issue contested above, if the taxpayer is able to provide the department with invoices showing that the items held subject to tax in the audit represented purchases of services only, apart from any purchases of tangible personal property, the audit will be adjusted further to remove these items.
In addition, §630-10-107 of the Regulations (copy enclosed) provides that the tax does not apply to "transportation or delivery charges added to a taxable sale provided such transportation charges are separately stated on the invoice to the customer." (Emphasis added) If such charges "are not separately stated on the invoice, they will become part of the sales price of the property and will be subject to the tax."
Therefore, if the taxpayer can provide invoices showing that any of the amounts held subject to tax in the audit represented separately stated charges for transportation or delivery added to a taxable sale, such amounts will also be removed from the audit.
The taxpayer should send any and all invoices mentioned in this letter to the department's Technical Services Section, office Services Division, at P.O. Box 6-L, Richmond, Virginia 23282, within thirty (30) days of the date of this letter. If such invoices are not received by the department within this time period, the audit will be deemed correct as issued and become immediately due and payable.
Based on all of the foregoing, the assessment will be adjusted upon receipt of the documentation requested.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner