Title of Regulation: 23VAC10-210. Retail Sales and Use Tax (amending 23VAC10-210-1020).

Statutory Authority: § 58.1-203 of the Code of Virginia.

Effective Date: February 3, 2010.

Agency Contact: Bland Sutton, Analyst, Department of Taxation, 600 East Main Street, Richmond, VA 23219, telephone (804) 371-2332, FAX (804) 371-2355, or email bland.sutton@tax.virginia.gov.

Summary:

Chapter 121 of the Acts of Assembly amended the definition of "retail sale" and "sale at retail" set forth in § 58.1-602 of the Code of Virginia to include separately stated charges for materials used in automotive refinishing and repair when such materials become permanently attached to the vehicle being refinished or repaired. This change in the definition of "retail sale" and "sale at retail" is a departure from the Department of Taxation's longstanding policy that treats automotive refinishers and painters as service providers and the taxable user or consumer of tangible personal property used in providing their service. The amended regulation allows automotive refinishers and repairers the option of continuing to operate as service providers or to be treated as retailers by separately stating their charge for materials.

Summary of Public Comments and Agency's Response: No public comments were received by the promulgating agency.

23VAC10-210-1020. Motor vehicle refinishers, painters and car washers.

A. Generally. Motor vehicle refinishers and, painters, and washers are generally engaged primarily in rendering personal services, and their gross receipts are not subject to the tax. However, they As personal service providers, motor vehicle refinishers, painters, and washers are the users and consumers of the materials used in their business and are required to pay tax on their purchases. When motor vehicle refinishers and, painters, and washers go beyond the rendition of services and sell tangible personal property such as accessories, parts, seatcovers, paint, etc., they are required to register and collect and pay remit the tax on those retail sales. This section also applies to car washers.

B. Optional tax treatment for motor vehicle refinishers and painters. Effective July 1, 2005, the definition of "retail sale" and "sale at retail" was amended to include separately stated charges made for automotive refinish repair materials that are permanently applied to or affixed to a motor vehicle during its repair. This definitional change affords motor vehicle refinishers and painters the option of either continuing to be treated as a personal service provider with respect to paint, clearcoat, sealants, and other similar items that become a component part of a motor vehicle during the refinishing or repair of the motor vehicle, or to be treated as a retailer with respect to such items. The election to be treated as a retailer is solely at the discretion of the motor vehicle refinisher or painter.

C. Motor vehicle refinishers and painters electing to operate as a retailer. A motor vehicle refinisher or painter electing to operate as a retailer is required to register with the Department of Taxation as a licensed dealer and collect and remit to the Department of Taxation the retail sales tax on all sales of tangible personal property made, including separately stated charges for automotive refinish repair materials. As a licensed dealer, a motor vehicle refinisher or painter may purchase all tangible personal property that becomes a component part of a motor vehicle during the refinishing, painting, or repair of the motor vehicle exempt of the tax for resale. Once a motor vehicle refinisher or painter elects to treat himself as a retailer, such election and tax application must be uniformly applied to all motor vehicle refinishing and repair work performed by such dealer.

D. Consumables and equipment. Regardless of whether the optional tax treatment is elected or not, motor vehicle refinishers, painters, and washers are liable for the tax on purchases of all tangible personal property used or consumed in the performance of their work, and that does not transfer to the customer.