92-28 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Common Carriers; Tow Truck Operator

Topic

Taxability of Persons and Transactions

Date Issued

04-20-1992

April 20, 1992

Re: §58.1-1821 Application: Sales and Use Tax

Dear****************

This will reply to your letter of March 11, 1992 in which you seek correction of a sales and use tax assessment for the period of December 1988 through May 1990.

FACTS

********(the Taxpayer) is a tow truck operator. The Taxpayer's business involves picking up wrecked or abandoned vehicles throughout the ******* area. In addition, the Taxpayer transports vehicles for customers, sometimes crossing state lines. In order to conform with federal regulations, the Taxpayer has applied for and been authorized to operate as a common carrier under a certificate of convenience and necessity issued by the Interstate Commerce Commission. The Taxpayer was audited by the department and assessed tax on repair and replacement parts for vehicles used in both a common carrier and contract carrier capacity. The Taxpayer is contesting the assessment based on the fact that they are classified as a common carrier by the Interstate Commerce Commission.

DETERMINATION

Va. Code §58.1-608(3)(c) provides a sales and use tax exemption for, "tangible personal property sold or leased to... a public service corporation engaged in business as a common carrier of property or passengers by motor vehicle or railways, for use or consumption by such common carrier directly in the rendition of its public service."

Virginia Regulation (VR) 630-10-24.3 (copy enclosed) addresses common carriers of property by motor vehicles and states, in part, the following:

- Va. Code [§58.1-608(3)(c)] (formerly §58.1-608(10)) extends an exemption from the sales and use tax to tangible personal property for use or consumption by a common carrier directly in the rendition of its public service. A common carrier must be authorized to operate under a certificate of convenience and necessity issued by the State Corporation Commission or the Interstate Commerce Commission in order to qualify for this exemption. This regulation applies only to common carriers of property by motor vehicle, including restricted common carriers, and has no application to contract or other carriers.

Subsection C of this regulation provides for the proration of the tax on tangible personal property used in both a taxable and exempt manner and states the following:

- It is possible for an item of tangible personal property to be used in both a taxable and exempt manner. For example, tools may be used to repair vehicles used in both contract and common carrier activities or a forklift may be used in both storage and temporary deposit. In such instances the tax due on the item is prorated between the percentage of time the property is used in a taxable manner and the percentage of time used in an exempt manner.

The proration would also be applied to repair parts on a vehicle used as both a common carrier and contract carrier. Based on the above and the fact the Taxpayer operates as a common carrier and a contract carrier, I will allow the Taxpayer to prorate those items held fully taxable.

Proration may be based upon the percentage of revenue generated from each separate operation, or miles traveled in each operation during the audit period. Upon receipt and verification of there figures, the audit will be adjusted accordingly. The department's *******District Office will contact you to schedule a meeting.

Sincerely,

W. H. Forst
Tax Commissioner

TPD/6028K

Rulings of the Tax Commissioner