Tax Type
Retail Sales and Use Tax
Description
Three party transactions; Products delivered outside the state
Topic
Taxability of Persons and Transactions
Date Issued
03-09-1989
March 9, 1989
Re: Request for Ruling: Sales and Use Tax
Dear*****************
Your letter to the State Comptroller regarding the application of Virginia sales and use tax to three-party transactions was referred to me for a reply.
FACTS
********* ("The Taxpayer"), located in Birmingham, New Jersey, sells products to companies located within Virginia. The Taxpayer wishes to know the applicability of sales and use tax in the following two scenarios: (A) The Taxpayer sells its product to a company located within Virginia. The Virginia company is billed for the product, but has it shipped to a third party located in another state. The Virginia company is tax exempt and has a valid Virginia sales tax certificate of registration. However, the end user in the third state is not tax exempt. (B) The Taxpayer sells its product to a company located within Virginia. The product is being paid for by the Virginia company, but it is being shipped from New Jersey directly to a branch located in another state.
RULING
§58.1-603 of the Code of Virginia imposes the sales tax upon "each item or article of tangible personal property...sold at retail...in this state." The term "sale" is defined in §58.1-602(16) of the Code of Virginia as "any transfer of title or possession...of tangible personal property."
§58.1-604 of the Code of Virginia imposes the use tax on "each item or article of tangible personal property used or consumed in this state." The term use is defined in §58.1-602(20) of the Code of Virginia as "the exercise of any right or power over tangible personal property incident to the ownership thereof."
The Virginia sales and use tax does not apply under either of the above scenarios as the Taxpayer's customers do not take title or possession of the tangible personal property in Virginia or otherwise make any use of the property in the state. Rather, the property is shipped directly from the Taxpayer's New Jersey facility to locations outside of Virginia.
While no Virginia sales or use tax would be due on these types of transactions, the Taxpayer or its customers may incur a sales or use tax in the state to which the property is shipped. The Taxpayer should contact the other state for information on the application of tax due that state.
I hope the foregoing information is helpful. Please contact the department if you need additional assistance.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner