Tax Type
Retail Sales and Use Tax
Description
Returned goods and repossessions; Restocking fee
Topic
Basis of Tax
Date Issued
05-16-1997
May 16, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear********************
This is in reply to your letter of February 25, 1997, in which you seek a correction of the department's sales and use tax assessment issued to *******(the "Taxpayer"), for the period February 1994 through October 1996. I note that the department has received the Taxpayer's payment of the audit assessment.
The Taxpayer is headquartered outside of Virginia selling food, mixes, and equipment to its Virginia franchises. The Taxpayer states that it disagrees with the imposition of tax on restocking fees on the basis that the actual restocking of the returned items takes place outside of Virginia. The Taxpayer requests an abatement of the assessment relating to such charges.
Code of Virginia § 58.1-619 provides in part that:
-
- In the event purchases are returned to the dealer by the purchaser or consumer after the tax imposed by this chapter has been collected or charged to the account of the purchaser, the dealer shall be entitled to reimbursement of the amount of tax so collected or charged by him, in the manner prescribed by the Tax Commissioner. The amount of tax so reimbursed to the dealer shall not, however, include the tax paid upon any cash retained by the dealer after such return of merchandise.
In previous rulings the department has consistently held taxable such restocking fees as services in connection with the sale of tangible personal property. The fact that such property is returned to an out of state location for restocking has no bearing on the taxability of such charges as the initial sale of the property was delivered to a Virginia situs and is considered a Virginia sale. Accordingly, the auditor properly applied the tax to such charges. I have enclosed copies of three previous rulings, P.D.'s 94-188 (06/10/94), 96-139 (06/18/96), and 96-215 (08/30/96), all of which present the department's detailed position. I must note that in one of the rulings, the addressee was an out of state headquartered business.
Based on the foregoing, and in consideration of the department's longstanding policy, l do not find sufficient cause for an adjustment to the department's audit.
If you should have any additional questions regarding this matter, please contact ****** of the department's Office of Tax Policy at******* .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12416Q
Rulings of the Tax Commissioner