Could a retailer rely on a 1997 public document to avoid tax on telephone calling cards sold after Virginia changed the law in 2004?

Subject

Telephone calling cards are taxable in Virginia

Plain-English summary

Virginia upheld sales tax on the retailer's telephone calling-card sales. The retailer relied on a 1997 public document that had treated the cards as exempt and said it was not told of a later change.

But the General Assembly amended Va. Code § 58.1-602 in 2004 to include telephone calling cards as tangible personal property on their initial sale. That statutory change became effective July 1, 2004 and superseded the older ruling.

The Department had published the change in its 2004 Legislative Summary and placed an update notation on the older public document. Because the controlling statute was clear, the Commissioner upheld the assessment and denied a refund.

What this means for you

• An older ruling can be displaced by a later statutory amendment.
• Check the current code and any superseded or update notation before relying on archived guidance.
• Lack of individualized notice does not preserve treatment that the legislature changed.

Citations and references

• Va. Code §§ 58.1-204, 58.1-602, and 58.1-603.
• Public Documents 97-346 and 04-40.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 14-10

Original ruling text

January 27, 2014

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

Dear *:

This will reply to your letter in which you seek correction of the retail sales and use tax assessment issued to * (the "Taxpayer) for the period March 2010 through February 2013.

FACTS

The Taxpayer operates a retail service station. The Department's audit disclosed untaxed sales of telephone calling cards. The Taxpayer states that it was unaware that phone calling cards are taxable in Virginia and states that a Department representative informed the Taxpayer that such phone cards were not taxable based on Public Document (P.D.) 97-346 (8/28/97). The Taxpayer also states that it was never advised of any new ruling that such cards are taxable. The Taxpayer seeks a waiver of the Department's assessment.

DETERMINATION

Virginia Code § 58.1-603 imposes the sales tax upon the gross sales price of tangible personal property sold at retail or distributed in Virginia.

Virginia Code § 58.1-602 defines "sale" to mean:

any transfer of title or possession or both . . . lease or rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property . . . for a consideration . . . ." [Emphasis added].

Virginia Code § 58.1-602 also defines tangible personal property to mean,

personal property which may be seen, weighed, measured, felt, or touched, or is in any other manner perceptible to the senses. The term "tangible personal property" shall not include stocks, bonds, notes, insurance or other obligations or securities. The term "tangible personal property" shall include (i) telephone calling cards upon their initial sale, which shall be exempt from all other state and local utility taxes, and (ii) manufactured signs. [Emphasis added].

The definition of tangible personal property was amended by the 2004 Session of the Virginia General Assembly to include the initial sale of telephone calling cards as taxable tangible personal property. See the 2004 Legislative Summary also referenced as P.D. 04-40 (8/1/04). The exemption for telephone calling cards as stated in P.D. 97­346 was overturned when the above definition became effective July 1, 2004. In the Laws, Rules and Decisions section of the Department's web site, P.D. 97-346 has a notation at the beginning of the document advising the reader to see the updated tax code section at Va. Code § 58.1-602.

The foregoing authorities can be found in the Department's website located at www.tax.virginia.gov . At the website, click on Laws, Rules and Decisions. This opens to the Department's repository of publications and guidance documents which provide information in the application of the tax laws. This same section also opens up a section listing several areas of reference documents available to the general public such as the Tax Code of Virginia, which refers specifically to Title 58.1 and other tax-related provisions found in other parts of the Code of Virginia . Other references include the tax regulations under the Virginia Administrative Code. The regulations assist in interpreting the statutes in the Code of Virginia . Also listed are the Legislative Summaries that provide a summation of legislative actions during specific years. The public can also access Rulings of the Tax Commissioner, otherwise known as public documents (P.D.'s), as well as Opinions of the Attorney General that relate to tax statutes and regulations. These have been available to the general public since 1998 and are easily accessible through the Internet.

With regard to news bulletins or notifications from the Department, Va. Code § 58.1-204 provides that the Department is required to publish regulations and written rulings or other interpretations of Virginia law that are of interest to taxpayers and tax practitioners. The Department employs various methods to disseminate information concerning the taxes that are administered such as the above referenced Internet site. The Department's website was constructed to be as user friendly as possible. As in any situation where information is accessed through the Internet, the ease of use has been at the forefront in considering the website's use by the Commonwealth of Virginia's taxpayers.

While the Taxpayer indicates that it was not informed about the sales tax on telephone calling cards, the foregoing demonstrates the Department's dissemination of information and its availability to the general public. The law is clear on this issue and I have no choice but to uphold the assessment. Accordingly, the assessment is correct, and no refund is due on any portion of the amount that has been paid.

If you have any questions regarding this determination, please contact * of the Department's Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-5451117459.Q