Tax Type
Egg Excise Tax
Description
Out-of-State Supplier
Topic
Basis of Tax
Date Issued
09-18-1996
September 18, 1996
RE: Request for Ruling: Egg Excise Tax
Dear***********
This will reply to your letter in which you seek a ruling on the application of the Virginia Egg Excise Tax on the sale of egg products by***********("the Taxpayer") to a manufacturer located in Virginia. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer, a distributor of dried, frozen, and liquid egg products, sells and ships dried egg yolk on a wholesale basis to a single Virginia manufacturer. The Taxpayer, who is located outside of Virginia, has no other customers or operations in Virginia. The Virginia manufacturer uses the dried egg yolk to manufacture pasta for nationwide sale and distribution. You request a ruling on whether the tax applies to eggs used in the manufacture of pasta products manufactured in Virginia or only to used in the manufacture of pasta products consumed in Virginia.
RULING
Code of Virginia § 3.1-796.11:3, copy enclosed, levies an egg excise tax on the purchase or sale of eggs, liquid eggs, or liquid equivalents for use or consumption in Virginia. The Virginia Egg Council, which works in conjunction with the department in administrating the egg excise tax, has provided the department a listing of processed egg products, this list includes "Dried Egg Yolk Solids." As an egg product, therefore, dried egg yolks are subject to the tax.
Code of Virginia § 3.1-796.11:4, copy enclosed, provides that a handler of eggs or egg products is responsible for collecting and remitting the tax to the department. For the purposes of the Egg Excise Tax, the term "handler," in pertinent part, is defined as, "[A]ny person who operates a grading station, packer, huckster, distributor and other person who purchases, sells, or handles eggs that are used at the wholesale level for consumption in Virginia."
Concerning handlers that are located outside of Virginia, the statute provides that:
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- Every person, whether inside or outside this Commonwealth, who engages in business in the Commonwealth as a handler is required to register and to collect and pay the tax on all eggs sold or delivered to anyone other that a registered handler for storage, use or consumption in this Commonwealth. (Emphasis added.)
If a company, therefore, is located outside of Virginia and sells eggs or egg products to a purchaser inside of Virginia to be used in Virginia, then that company is required to register for the Virginia Egg Excise Tax, collect the egg tax from the purchaser, and remit the tax to the department.
To determine when eggs are "used" in Virginia, the statute provides that, "Eggs shall be deemed to be "used" in Virginia if, at a Virginia location, they are incorporated into another product so as to lose their character as eggs." As a result, if a company sells eggs to a Virginia purchaser who uses the eggs to manufacture another product, such that the eggs lose their character as eggs, then the purchaser is deemed to have used the eggs in Virginia. The registered handler must charge the tax on the sale of the eggs to the purchaser regardless of whether the manufactured product is subsequently sold or shipped outside of Virginia.
In the instant case, the Taxpayer sells, on a wholesale basis, dried egg yolk to a Virginia company, who uses this egg product to manufacture pasta for sale and distribution inside and outside of Virginia. For purposes of the Virginia Egg Excise Tax, the Taxpayer is a handler of egg products sold to a manufacturer located in Virginia. In that the egg products are incorporated into the manufacturing of pasta and loses it character as an egg product, the egg product is deemed to be used in Virginia even if the pasta is subsequently sold outside of Virginia. The Taxpayer, therefore, must become a registered handler by registering for the Virginia Egg Excise Tax, collecting the tax from the manufacturer, and remitting the tax to the department.
I hope this response satisfactorily addresses the issues in your letter. In addition, I have enclosed Virginia Tax Bulletin 96-4, which clarifies the department's position of the treatment of the Virginia Egg Excise Tax. If there are further questions, please contact ****at*******.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10246N
Rulings of the Tax Commissioner