Tax Type
Retail Sales and Use Tax
Description
1988 Legislative Changes: Retail Sales and Use Tax, Watercraft
Topic
Basis of Tax
Date Issued
06-01-1988
1988 Legislative Changes: Retail Sales and Use Tax, Watercraft Sales and Use Tax
The 1988 General Assembly enacted several laws which have an impact upon the retail sales and use tax and the watercraft sales and use tax. Brief summaries of the enacted legislation are provided below:
RETAIL SALES AND USE TAX
Use Tax on Construction Equipment
House Bill 555 (Chapter 379) levies a special use tax on motor vehicles, machinery, tools and equipment brought into Virginia for use in performing construction contracts. The rate of the special use tax is 3 1/2%, except with respect to: motor vehicles, which are taxed at the rate of 3%; aircraft, which are taxed at a rate of 2%; and watercraft, which are taxed at a rate of 2%, with a maximum tax of $1,000.
This tax does not apply to such property purchased in a state that does not impose a similar tax upon Virginia contractors. The current credit for sales tax paid to another state does not apply to this special use tax. Effective Date: March 30. 1988.
A Virginia Tax Bulletin on this law change will be published shortly. The department is currently developing forms and instructions for the quarterly reporting of this tax. These forms and instructions will be available by July 1, 1988.
Federal Diesel Fuel Excise Tax
Senate Bill 312 (Chapter 899) amended Va. Code §58.1-602 to continue to exclude the federal diesel fuel excise tax from the base for computing the Virginia sales tax, when separately stated on sales invoices or records. The department previously notified diesel fuel dealers by Virginia Tax Bulletin 88-3, dated April 1, 1988, that the federal diesel fuel excise tax would be excluded from the sales and use tax base on all sales made from April 1 through April 30, 1988. Thus, on and after April 1, 1988, the federal diesel fuel excise tax is not included in the base for computing the sales and use tax. Effective Date: May 1, 1988.
See Virginia Tax Bulletin 88-4 for more information on this law change.
Telecommunications Companies
Senate Bill 312 (Chapter 899) subjects certain telecommunications companies to the corporate income tax in lieu of the public service corporation tax on gross receipts. The bill also amends Va. Code §58.1-608.10 to clarify that the current sales and use tax exemption for public service corporations, subject to a franchise or license tax on gross receipts, also applies to (1) a telecommunications company as defined in §58.1-400.1 and (2) a telephone company chartered in the Commonwealth which is exclusively a local mutual association and is not designated to accumulate profits for the benefit of, or to pay dividends to, the stockholders or members thereof. Effective Date: January 1, 1989.
Collection of Data on Town Sales
Senate Bill 311 (Chapter 456) adds Va. Code §58.1-3128.1 to grant town councils the authority to require that retail sales and use tax dealers within the town furnish to the town treasurer an annual statement of the sales and use tax attributable to the town. The town treasurer of any town enacting such a requirement, is required to transmit all data collected from the dealers to the Auditor of Public Accounts for publication in the Comparative Report of Local Government Revenues and Expenditures. This bill does not change the method in which local sales and use tax is distributed between counties and towns. Effective Date: July 1, 1988.
Evaluation of Sales Tax Exemption Criteria
Senate Joint Resolution 70 continues the joint subcommittee studying criteria for evaluating sales and use tax exemptions (SJR 119, 1987) and requires the Secretary of Finance and the Tax Commissioner to propose criteria for evaluating existing exemptions and to evaluate existing exemptions using these criteria beginning in 1990 and concluding in 1994.
Senate Bill 314 (Chapter 457) provides the Tax Commissioner with the authority to require persons to furnish the information necessary to conduct the evaluation of the sales tax exemptions required by SJR 70.
WATERCRAFT SALES AND USE TAX
Volunteer Fire Departments and Rescue Squads
House Bill 745 (Chapter 314) exempts from the watercraft sales and use tax the purchase of any watercraft by a nonprofit volunteer rescue squad or nonprofit volunteer fire department. Effective Date: July 1, 1988, retroactive for watercraft purchased on or after July 1, 1986
If there are any questions regarding this bulletin, please contact the Department of Taxation, P. O. Box 6-L, Richmond, Virginia 23282 or call (804) 367-8037.
Rulings of the Tax Commissioner