Tax Type
Retail Sales and Use Tax
Description
Public service corporations; Research and development
Topic
Taxability of Persons and Transactions
Date Issued
04-28-1989
April 28, 1989
Re: Ruling Request/ Sales and Use Tax
Dear***************
This will reply to your letter of February 22, 1989 seeking information on the research and development exemption from the sales and use tax.
FACTS
In connection with an audit currently being conducted by the department, you ask whether a taxpayer which qualifies for tax exemption as a public service corporation under Virginia Code §58.1-608(10), may also qualify for the research and development exemption in Virginia Code §58.1-608(19).
RULING
Virginia Code §58.1 -608(10) provides an exemption from the sales and use tax for "[t]angible personal property sold or leased to (i) a public service corporation subject to a state franchise or license tax upon gross receipts, [or] (ii) a telephone company as defined in §58.1 -400.1 . . . for use or consumption by such corporation ... directly in the rendition of its public service. " Virginia Retail Sales and Use Tax Regulation (VR) 630-10-87, effective January 1, 1985, interprets the scope of this exemption.
In addition, Virginia Code §58.1-608(19) provides an exemption from the sales and use tax for "[t]angible personal property purchased for use or consumption directly and exclusively in basic research or research and development in the experimental or laboratory sense." VR 630-10-92(C) then provides that, "[r]esearch and development in the experimental or laboratory sense should have as its ultimate goal: (1) the development of new products; (2) the improvement of existing products; or (3) the development of new uses for existing products." See also, Section 3 of VR 630-10-49.2, governing innovative high technology industries and research, (effective March 15, 1987 retroactive to December 1, 1986,) which provides in relevant part that, "most research into innovative technologies or fields will qualify for the research exemption. "
Based on the foregoing, I find nothing in the current law or regulations cited above which would preclude a public utility or public service corporation from qualifying for the research and development exemption. Thus, certain items of tangible personal property may qualify for the research and development exemption even though they do not qualify for the public utility exemption.
I hope that this has responded to your question, but let us know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner