Should a ready-mix concrete company's sales tax be sourced to the local jurisdiction where its plant/office takes the customer's order, or to the jobsite where the concrete is actually delivered and poured?

Plain-English summary

A ready-mix concrete producer, Mechanicsville Concrete LLC (doing business as Powhatan Ready Mix), sued the Virginia Department of Taxation over how its concrete sales should be "sourced" for local sales tax purposes -- meaning which Virginia locality gets to tax the sale and at what local rate. The company argued its sales should be sourced to the various jobsites where its ready-mix concrete was actually delivered and poured. The Department had assessed the company's sales tax based instead on Norfolk, Virginia, where the company's own place of business first takes customer orders.

Both sides moved for summary judgment (asking the court to decide the legal question based on stipulated facts, without a full trial), and the Circuit Court of the City of Richmond sided entirely with the Department. The court's reasoning rested on 23 VAC 10-210-2070, which sources sales of tangible personal property to the dealer's "place of business" -- defined in the regulation as the Virginia location that FIRST TAKES the purchaser's order. The court found this sourcing rule consistent with Va. Code § 58.1-605 (Virginia's local sales and use tax statute). It also rejected the company's argument that a different regulation, 23 VAC 10-210-360, somehow addressed (or conflicted with) ready-mix concrete sourcing specifically -- the court found that regulation simply doesn't discuss ready-mix concrete sourcing at all, so there was no conflict to resolve. Two prior Tax Commissioner rulings the company cited (P.D. 82-65 and P.D. 13-100) were found not to address the sourcing question before the court either.

Finally, the company raised a fairness argument -- that sourcing its sales to its Norfolk place of business rather than to the delivery jobsites discriminated against it and its customers. The court rejected that too, noting that sales sourced to the two regions in question were taxed at the same rate, so there was no actual discriminatory effect from applying the Department's sourcing rule. The court granted the Department's motion for summary judgment, denied the company's motion, and sustained the Department's assessment and determination on the appropriate situs for ready-mix concrete sales.

What this means for you

Ready-mix concrete producers and similar delivery-based sellers of tangible personal property

Under this court's ruling, your sales tax sourcing follows your own business location that FIRST TAKES the customer's order -- not the various delivery/jobsite locations where the product is ultimately used or installed. If you operate from one central location and deliver across multiple localities, expect your sales to be sourced (and taxed at the applicable local rate) based on where the order is taken, not where the truck unloads.

Businesses trying to source sales to a favorable local tax rate based on delivery location

This court rejected the argument that delivery/installation location should control sourcing for tangible personal property sales, at least on facts like these (no regulation specific to the product that conflicts with the general "place of business" sourcing rule). If your product involves delivery across multiple localities with different rates, don't assume you can source to the lower-taxed delivery jurisdiction instead of your own order-taking location.

Anyone weighing whether a Tax Commissioner ruling actually resolves a specific sourcing question

The company here cited two of the Department's own prior rulings (P.D. 82-65 and P.D. 13-100) that turned out NOT to address the sourcing issue in dispute. Read cited rulings carefully for whether they actually decide YOUR specific factual question, rather than assuming a topically-related ruling controls.

Common questions

Q: How is a ready-mix concrete sale sourced for Virginia local sales tax purposes?
A: To the seller's "place of business" -- specifically, the Virginia location that first takes the purchaser's order -- not to the jobsite where the concrete is delivered and poured, according to this court's application of 23 VAC 10-210-2070.

Q: Is this a binding decision for all Virginia courts and taxpayers?
A: No. It's a single circuit court's summary judgment order in one case, not an appellate decision, so it doesn't formally bind other courts -- though it reflects one court's clear application of the existing sourcing regulation to this specific product and fact pattern.

Q: Did the court find any regulation specific to ready-mix concrete sourcing?
A: No -- the court found that 23 VAC 10-210-360 (cited by the company) doesn't discuss ready-mix concrete sourcing at all and doesn't conflict with the general "place of business" sourcing rule in 23 VAC 10-210-2070.

Citations and references

• 23 VAC 10-210-2070 (sale of tangible personal property is sourced to the dealer's "place of business," defined as the Virginia location that first takes the purchaser's order)
• Va. Code § 58.1-605 (Virginia's local sales and use tax statute, found consistent with the sourcing regulation applied)
• P.D. 82-65 and P.D. 13-100 (prior Tax Commissioner rulings the taxpayer cited; the court found neither addressed the ready-mix concrete sourcing issue before it)

Subject

Sales : Sourcing - Ready-Mix Concrete

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 21-170-0

Original ruling text

Virginia

In the Circuit Court of the City of Richmond, John Marshall Court Building

MECHANICSVILLE CONCRETE LLC

(d/b/a Powhatan Ready Mix),

Applicant,

v. Case No.: CL20-2971

VIRGINIA DEPARTMENT OF TAXATION

Respondant,

ORDER

On November 8, 2021, the parties appeared in person and by Counsel on both parties' Motions for Summary Judgment of Applicant's Application for Correction of Erroneous Assessment and Claim for Refund. Upon consideration of the arguments, memorandum, pleadings, and joint stipulation of facts, the Court FINDS the following:

a) Sales of ready-mix concrete are properly sourced to the locality of Applicant's place of business in Norfolk, Virginia pursuant to 23 VAC 10-210-2070, where "the sale of tangible personal property.. is sourced to that [dealer's] place of business... " and "place of business" is defined as "the location in Virginia that first takes the purchaser's order." The language of this regulation is consistent with Virginia Code Section 58. 1-605 and 58.1- 605;

b) None of the provisions of 23 V AC 10-210-360 discuss the souring of sales of ready-mix concrete and does not conflict with the sourcing provisions of 23 V AC 10-210-2070;

c) The Tax Commissioner's prior determinations referenced by Applicant do not discuss the sourcing of sales of ready-mix concrete. Specifically, P.D. 82-65 and P.D. 13-100 did not address the sourcing issue before the Court;

d) Sales sourced to the two regions in question are taxed at the same rate, and therefore the Department of Taxation's ruling does not discriminate against Applicant and its customers. Accordingly, the Court hereby GRANTS Respondents Motion for Summary Judgment,

DENIES Applicant's Motion for Summary Judgement, and SUSTAINS the Department of Taxation's assessment and determination as to the appropriate situs for sales of ready-mix concrete.

Pursuant to Rule I: 13 of the Supreme Court of Virginia, the Court dispenses with the parties' endorsement of this Order.

The Clerk is directed to forward a certified copy of this Order to all parties. It is so ORDERED .

ENTER: 11/12/21 W. Reilly Marchant, Chief Judge