Tax Type
Retail Sales and Use Tax
Description
Interstate transactions; Debit and credit cards delivered out-of-state
Topic
Taxability of Persons and Transactions
Date Issued
11-02-1993
November 2, 1993
Re: Request for Ruling: Retail Sales and Use Tax
Dear********************
This will reply to your July 1, 1993 letter seeking clarification of the department's constructive delivery policy set forth in a August 2, 1989 determination to *********** (the Taxpayer).
FACTS
The Taxpayer manufactures plastic debit and credit cards. The Taxpayer receives orders from financial institutions (clients) and mails the new cards to that institution's customers. One of the Taxpayer's clients resides in Maryland and orders cards for its customers in that state. Although the department has collected sales tax due to the financial institution's constructive possession of the cards prior to mailing, Maryland maintains that the Taxpayer is liable for Maryland sales and use tax because the cards are delivered to that state. The Taxpayer requests a ruling on this issue in light of the conflicting positions taken by Virginia and Maryland.
RULING
The sale of tangible personal property delivered to the purchaser outside Virginia constitutes an exempt sale in interstate commerce. (See Virginia Regulation (VR) 63010-51, copy enclosed.) In order for the Taxpayer's credit card sales to qualify for exemption from the tax as sales in interstate commerce, delivery of the cards must be made to clients outside the state in the Taxpayer's vehicles, or by independent truckers or contract carriers hired by the Taxpayer, or via common carriers or the U.S. Post Office. However, when the client directs the Taxpayer to send the credit cards directly to its customers, the sale is subject to the Virginia tax since the Taxpayer's client takes constructive possession of the cards in Virginia before they are shipped to their customers outside the state. Since first use of such cards is made by the Taxpayer's client in Virginia, any other state which seeks to impose their sales tax on these same cards typically would grant a credit for sales or use tax paid to Virginia. It is my understanding that Maryland has contacted the Taxpayer and has agreed to grant such a credit in this case.
I hope this has responded to your inquiry and if you have additional questions please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/7135J
Rulings of the Tax Commissioner