Section 1.9701
GENERAL PROVISIONS
Reg.§ 1.9701(4) -
1 Sales
Price.
Except as noted below, "sales price" for purposes of
calculating tax means the total amount of consideration, including cash,
credit, property, and services for which personal property or services are
sold, leased or rented.
Where the seller receives credit, property (other than a
like-kind trade-in), a service, or other nonmonetary considerations in exchange
for personal property or services, the sales price includes the monetary value
of such consideration. If the value of the consideration cannot be determined,
it is presumed to equal the price at which the seller normally offers the
product for sale.
Even where stated as a charge separate from the charge for
the property or service, the sales price includes charges for labor to create
the product sold, charges for services necessary to complete the sale, and
delivery charges.
"Delivery charges" means charges by the seller of personal
property or services for preparation and delivery to a location designated by
the purchaser of personal property or services including, but not limited to,
transportation, shipping, postage, handling, crating, and packing. Direct mail
delivery charges that are separately stated on an invoice or similar billing
document given to the purchaser are excluded from the definition of "delivery
charges." 32 V. S.A. § 9701(26).
If a shipment includes exempt property and taxable property,
the seller may allocate the delivery charge by using:
1. a percentage based on the total sales
prices of the taxable property compared to the sales prices of all property in
shipment; or
2. a percentage based
on the total weight of the taxable property compared to the total weight of all
property in the shipment.
If the seller elects not to allocate the delivery charge, the
entire charge is subject to the tax.
Reg.§ 1.9701(4) -
2 Exclusions
from Sales Price.
The following are excluded from the sales price when they are
separately stated on the invoice, bill of sale, or similar document given to
the purchaser:
1. Any discounts,
including cash, term, or coupons not reimbursed by a third party that are
allowed by the seller and taken by the purchaser on the sale;
2. Interest, financing and carrying charges
on credit extended on the sale;
3.
Any tax (such as the Vermont sales tax) that is legally imposed directly on the
purchaser that the seller collects and remits;
4. Charges for the installation of the
property sold;
5. A credit given
for trade-in of like-kind property. A trade-in of like-kind property occurs
where the seller is in the business of selling such property and accepts as
part of the consideration property of the buyer that serves the same function
as the property sold. The fact that the property taken in trade can no longer
serve the same function because it is worn, damaged, or obsolete does not
disqualify the property from being a like-kind trade-in; and
6. Telecommunications nonrecurring charges.
A. "Distinct and identifiable
products" does not include:
1. Packaging -
such as containers, boxes, sacks, bags, and bottles - or other materials - such
as wrapping, labels, tags, and instruction guides - that accompany the retail
sale of the products and are incidental or immaterial to the retail sale
thereof. Examples of packaging that are incidental or immaterial include
grocery sacks, shoeboxes, dry cleaning garment bags and express delivery
envelopes and boxes.
2. A product
provided free of charge with the required purchase of another product. A
product is "provided free of charge" if the sales price of the product
purchased does not vary depending on the inclusion of the product provided free
of charge.
3. Items included in the
definition of "sales price." See Reg. § 1.9701(4) -
1.
B. The term "one non-itemized
price" does not include a price that is separately identified by product on
binding sales or other supporting sales-related documentation made available to
the customer in paper or electronic form including, but not limited to an
invoice, bill of sale, receipt, contract, service agreement, lease agreement,
periodic notice of rates and services, rate card, or price list.
C. A transaction that otherwise meets the
definition of a bundled transaction as defined above is not a bundled
transaction if it is:
1. The retail sale of
tangible personal property and a service where the tangible personal property
is essential to the use of the service, and is provided exclusively in
connection with the service, and the true object of the transaction is the
service; or
2. The retail sale of
services where one service is provided that is essential to the use or receipt
of a second service and the first service is provided exclusively in connection
with the second service and the true object of the transaction is the second
service; or
3. A transaction that
includes taxable products and nontaxable products and the purchase price or
sales price of the taxable products is de minimis.
(a) "De minimi" means the seller's purchase
price or sales price of the taxable products is ten percent or less of the
total purchase price or sales price of the bundled products.
(b) Sellers shall use either the purchase
price or the sales price of the products to determine if the price of the
taxable products is de minimis. Sellers may not use a combination of the
purchase price and sales price of the products to determine if the price of the
taxable products is de minimis.
(c)
Sellers shall use the full term of a service contract to determine if the
taxable products are de minimis; or
4. The retail sale of exempt tangible
personal property and taxable tangible personal property where:
(a) the single-price transaction includes
food and food ingredients; drugs, durable medical equipment, mobility enhancing
equipment, over-the-counter drugs, prosthetic devices or medical supplies;
and
(b) where the seller's purchase
price or sales price of the taxable tangible personal property is fifty percent
or less of the total purchase price or sales price of the bundled tangible
personal property. Sellers may not use a combination of the purchase price and
sales price of the tangible personal property when making the fifty percent
determination for a transaction.
Transactions meeting the conditions outlined in subsections
(C)(3) and (4) above are not taxable.
D. In the case of a bundled transaction that
includes telecommunication service, ancillary service, internet access, or
audio or video programming service:
1. If the
price is attributable to products that are taxable and products that are
nontaxable, the portion of the price attributable to the nontaxable products
may be subject to tax unless the provider can identify by reasonable and
verifiable standards such portion from its books and records that are kept in
the regular course of business for other purposes, including, but not limited
to, non-tax purposes.
2. The
provisions of this section shall apply unless otherwise provided by federal
law.
E. The seller is
the user of a product transferred to a purchaser if the product is:
1. Packaging described in subsection
(A)(1);
2. A product that is
promotional in nature and/or is provided free of charge, as described in
subsection (A)(2); or
3. Property
transferred with a service and not taxed pursuant to subsection (C)(1).
The seller pays sales or use tax when such property is
acquired or removed from inventory unless another exemption applies.
F. Except as indicated
in subsection (E), above, the seller is not the user of a product that
qualifies as de minimis under subsection (C)(3) of this section, or of a
product transferred in a single-price transaction meeting the requirements of
subsection (C)(4) of this section. The seller is not required to pay a sales or
use tax on such transactions.
G. If
an optional computer software maintenance contract is a bundled transaction in
which both taxable and nontaxable or exempt products are not separately
itemized on the invoice or similar billing document, the contract shall be
characterized as all taxable unless the vendor can demonstrate, using a
reasonable method at the time of sale, the portion of the contract that is
nontaxable or exempt products. See Reg. § 1.9701(7) -
2(C)(3)
("Prewritten Computer Software").
H. Examples:
1. A seller offers to its customers a package
containing maple syrup, maple candy, and a ceramic pitcher. Each item has a
retail price of $ 10, and the package is sold for a single price of $ 30.
Pursuant to subsection (C)(4), the entire charge is not taxable because the
value of the taxable item (the pitcher) is fifty percent or less of the total
sales price and it is bundled with food items. The seller is not considered the
user of the pitcher and may purchase the item tax- exempt for resale.
2. A raincoat has a retail price of $ 100 and
umbrella a retail price of $ 20. A seller offers the two items to its customers
for the single price of $ 120. Pursuant to subsection (C)(3), the entire charge
is taxable - notwithstanding that clothing is exempt from the tax - because the
products are sold for a single charge and the value of the umbrella is not de
minimis because it exceeds ten percent of the total purchase price.
3. A ski resort sells a ski pass valued at $
70. Each purchaser also receives a bumper sticker valued at $ 2. The seller is
required to collect the sales tax on the $ 70 ski pass, but because the bumper
sticker is promotional in nature and does not qualify as a purchase for resale,
see subsection (A)(2), the seller is required to pay sales or use tax on the
promotional item pursuant to subsection (E)(2).
See also Reg. § 1.9701(7) ("Tangible Personal
Property").
Reg.§ 1.9701(5) -
1 Retail
Sale.
The term "retail sale" means a sale for any purpose other
than for resale, sublease, or subrent. The term "sale" includes any transfer of
title or possession or both, exchange or barter, rental, lease or license to
use or consume, conditional or otherwise, in any manner or by any means
whatsoever for a consideration, or any agreement therefor.
Sales to contractors, subcontractors or repair persons (other
than retailers or manufacturers making an election under
32 V.S.A. §
9711) , of materials and supplies for use by
them in erecting structures or otherwise improving, altering, or repairing real
property are retail sales. Once the tangible personal property is incorporated
into the real property, the sale of the real property is not subject to sales
and use tax, regardless of whether the incorporated tangible personal property
is itemized by the seller.
A sale of tangible personal property for use by the purchaser
in performing a service is a retail sale and not a purchase for resale.
Reg.§ 1.9701(5) -
2 Lease or
Rental.
"Lease or rental" means any transfer of possession or control
of tangible personal property for a fixed or indeterminate term for
consideration. A lease or rental may include future options to purchase or
extend.
A purchaser of tangible personal property who purchases the
property primarily for the purpose of leasing or renting the property to others
is entitled to purchase such tangible personal property free of sales and use
tax. The purchaser may similarly obtain repair parts for the rental or lease
property free of the tax. The purchase of equipment or supplies used in
conjunction with the service or care of rental property, however, is subject to
tax because the materials are not considered to be purchased for resale.
A purchaser of tangible personal property not primarily
intended for lease or rental must pay the sales and use tax at the time of
purchase, and should not collect any tax upon the receipts from the isolated or
occasional rental or lease to others. Conversely, the isolated and occasional
use by the purchaser of rental or lease property is permissible without
triggering payment of the sales and use tax on the purchase price of the
property. For a use to qualify as "isolated and occasional," it shall not
exceed four percent of total use.
A.
Lease or rental does not include:
1. A
transfer of possession or control of property under a security agreement or
deferred payment plan that requires the transfer of title upon completion of
the required payments;
2. A
transfer of possession or control of property under an agreement that requires
the transfer of title upon completion of required payments and payment of an
option price that does not exceed the greater of one hundred dollars or one
percent of the total required payments; or
3. Providing tangible personal property along
with an operator for a fixed or indeterminate period of time. A condition of
this exclusion is that the operator is necessary for the equipment to perform
as designed. For the purpose of this subsection, an operator must do more than
maintain, inspect, or set-up the tangible personal property.
B. This definition shall be used
for sales and use tax purposes regardless of whether a transaction is
characterized as a lease or rental under generally accepted accounting
principles, the Internal Revenue Code, Title 9A of the Vermont Statutes
Annotated, or other provisions of federal, state or local law.
Reg.§ 1.9701(5) -
3
Drop Shipment.
In the case of drop shipment sales, the seller (drop shipper)
may claim a resale exemption based on an exemption certificate provided by its
customer/reseller or any other information available to it that demonstrates to
the Commissioner that the customer is purchasing for resale, regardless of
whether the customer/reseller is registered to collect and remit sales and use
tax in Vermont.
Reg.§ 1.9701(7) -
1 Tangible
Personal Property.
"Tangible personal property" means personal property which
may be seen, weighed, measured, felt, touched or in any other manner perceived
by the senses. The statutory definition specifically includes electricity,
water, gas, steam, and prewritten computer software, even if the software is
delivered electronically. "Delivered electronically" means delivered to the
purchaser by means other than tangible storage media.
For tax purposes, the following definitions apply:
1. "Computer" means an electronic device that
accepts information in digital or similar form and manipulates it for a result
based on a sequence of instructions.
2. "Electronic" means relating to technology
having electrical, digital, magnetic, wireless, optical, electromagnetic, or
similar capabilities.
3. "Computer
software" means a set of coded instructions designed to cause a computer or
automatic data processing equipment to perform a task.
4. "Load and leave" means delivery to the
purchaser by use of a tangible storage media where the tangible storage media
is not physically transferred to the purchaser.
A. Tangible personal property includes, but
is not limited to:
1. raw materials, such as
wood, metal, rubber and minerals;
2. manufactured items such as jewelry,
furniture, machinery, clothing, lighting fixtures, appliances, and building
materials;
3. artistic items such
as sketches, paintings, photographs, moving picture films, tapes and DVDs, and
recordings when on a tangible medium;
4. stamps and other philatelic items when
purchased other than for use as postage; coins and other numismatic items when
purchased other than for use as a medium of exchange;
5. precious metals such as bullion, ingots,
and wafers.
B. Tangible
personal property does not include:
1. real
property;
2. items such as books,
movies, or music delivered electronically (except prewritten software as
provided by statute);
3. stamps
when purchased for use as postage; coins and other numismatic items when
purchased as a medium of exchange;
4. intangible personal property such as
rights and credits, insurance policies, bills of exchange, stocks and bonds and
similar evidences of indebtedness or ownership, unless they are sold for
historical display or collection purposes.
5. charges for the right to access remotely
prewritten computer software provided that the software is not
downloaded.
Reg.§ 1.9701(7) -
2 Prewritten
Computer Software.
A. "Prewritten
computer software" means computer software, including prewritten upgrades,
which is not designed and developed by the author or other creator to the
specifications of a specific purchaser. The combining of two or more prewritten
computer software programs or prewritten portions thereof does not cause the
combination to be other than prewritten computer software. Prewritten computer
software includes software designed and developed by the author or other
creator to the specifications of a specific purchaser when it is sold to a
person other than the specific purchaser. Where a person modifies or enhances
computer software of which the person is not the author or creator, the person
shall be deemed to be the author or creator only of such person's modifications
or enhancements. Prewritten computer software or a prewritten portion thereof
that is modified or enhanced to any degree, where such modification or
enhancement is designed and developed to the specifications of a specific
purchaser, remains prewritten computer software; provided, however, that where
there is a reasonable, separately stated charge or an invoice or other
statement of the price given to the purchaser for such modification or
enhancement, such modification or enhancement shall not constitute prewritten
computer software.
B. A "computer
software maintenance contract" is a contract that obligates a vendor of
computer software to provide a customer with future updates or upgrades to
computer software, support services with respect to computer software or both.
1. A "mandatory computer software maintenance
contract" is a computer software maintenance contract that the customer is
obligated by contract to purchase as a condition to the retail sale of computer
software, and is subject to the tax.
2. An "optional computer software maintenance
contract" is a computer software maintenance contract that a customer is not
obligated to purchase as a condition to the retail sale of computer
software.
C. In the case
of a transaction that includes an "optional computer software maintenance
contract" for prewritten computer software:
1. If an optional computer software
maintenance contract only obligates the vendor to provide upgrades and updates,
it will be characterized as a sale of prewritten computer software, and is
subject to tax.
2. If an optional
computer software maintenance contract only obligates the vendor to provide
support services, it will be characterized as a sale of services and is
exempt.
3. If an optional computer
software maintenance contract is a bundled transaction in which both taxable
and nontaxable or exempt products that are not separately itemized on the
invoice or similar billing document, the contract shall be characterized as all
taxable unless the vendor can demonstrate, using a reasonable method as of the
time of sale, the portion of the contract that is nontaxable or exempt
products. See Reg. § 1.9701(4) -
3
("Bundled Transaction").
D. The method used by the vendor shall be
binding on the purchaser.
Reg.§ 1.9701(8) -! Sales Sourced to Vermont.
A sale is located "in this state" or "in the state" if it is
sourced to a location in Vermont under the terms of the General Sourcing Rules,
Reg. § 1.9701(8) -
3.
Reg.§ 1.9701(8) -
2 General
Sourcing Definitions.
For the purpose of subsection (A) of the General Sourcing
Rules, Reg. § 1.9701(8) -
3,
the terms "receive" and "receipt" mean:
1. taking possession of tangible personal
property, or
2. making first use of
services, or
3. taking possession
or making first use of digital goods, whichever comes first.
The terms "receive" and "receipt" do not include possession
by a shipping company on behalf of the purchaser.
Reg.§ 1.9701(8) -
3
General Sourcing Rules.
A. The retail
sale, excluding lease or rental, of a product shall be sourced as follows:
1. When the product is received by the
purchaser at a business location of the seller, the sale is sourced to that
business location.
2. When the
product is not received by the purchaser at a business location of the seller,
the sale is sourced to the location where receipt by the purchaser (or the
purchaser's donee, designated as such by the purchaser) occurs, including the
location indicated by instructions for delivery to the purchaser (or donee)
known to the seller.
3. When
subsections (A)(1) and (A)(2) do not apply, the sale is sourced to the location
indicated by an address for the purchaser that is available from the business
records of the seller that are maintained in the ordinary course of the
seller's business when use of this address does not constitute bad
faith.
4. When subsections (A)(1),
(A)(2), and (A)(3) do not apply, the sale is sourced to the location indicated
by an address for the purchaser obtained during the consummation of the sale,
including the address of a purchaser's payment instrument, if no other address
is available, when use of this address does not constitute bad faith.
5. When none of the previous subsections
(A)(1), (A)(2), (A)(3), or (A)(4) apply, including the circumstance in which
the seller is without sufficient information to apply the previous rules, then
the location will be determined by the address from which tangible personal
property was shipped, from which the digital good or the computer software
delivered electronically was first available for transmission by the seller, or
from which the service was provided (disregarding for these purposes any
location that merely provided the digital transfer of the product
sold).
B. The lease or
rental of tangible personal property, other than property identified in
subsection (C) or subsection (D), shall be sourced as follows:
1. For a lease or rental that requires
recurring periodic payments, the first periodic payment is sourced the same as
a retail sale in accordance with the provisions of subsection (A). Periodic
payments made subsequent to the first payment are sourced to the primary
property location for each period covered by the payment. The primary property
location shall be as indicated by an address for the property provided by the
lessee that is available to the lessor from its records maintained in the
ordinary course of business, when use of this address does not constitute bad
faith. The property location shall not be altered by intermittent use at
different locations, such as use of business property that accompanies
employees on business trips and service calls.
2. For a lease or rental that does not
require recurring periodic payments, the payment is sourced the same as a
retail sale in accordance with the provisions of subsection (A).
3. This subsection does not affect the
imposition or computation of sales or use tax on leases or rentals based on a
lump sum or accelerated basis, or on the acquisition of property for
lease.
C. The retail
sale, including lease or rental, of transportation equipment not subject to the
purchase and use tax administered by the Department of Motor Vehicles shall be
sourced the same as a retail sale in accordance with the provisions of
subsection (A), notwithstanding the exclusion of lease or rental in subsection
(A). "Transportation equipment" means any of the following:
1. Locomotives and railcars that are utilized
for the carriage of persons or property in interstate commerce.
2. Trucks and truck-tractors with a Gross
Vehicle Weight Rating (GVWR) of 10,001 pounds or greater, trailers,
semi-trailers, or passenger buses that are:
(a) Registered through the International
Registration Plan; and
(b) Operated
under authority of a carrier authorized and certificated by the U.S. Department
of Transportation or another federal authority to engage in the carriage of
persons or property in interstate commerce.
3. Aircraft except those exempted by
32 V.S.A.
§
9741(29) as aircraft
sold for use in air commerce.
4.
Containers designed for use on and component parts attached or secured on the
items set forth in subsections (D)(1) through (D)(3).
Reg.§ 1.9701(8) - 4 Direct Mail Sourcing.
A. Notwithstanding the general sourcing rules
stated herein, the following provisions apply to sales of "advertising and
promotional direct mail":
1. A purchaser of
"advertising and promotional direct mail" may provide the seller with either:
(a) A direct pay permit;
(b) An Agreement certificate of exemption
claiming "direct mail"; or
(c)
Information showing the jurisdictions to which the "advertising and promotional
direct mail" is to be delivered to recipients.
2. If the purchaser provides the permit,
certificate or statement referred to in subparagraph a or b of subsection A of
this section, the seller, in the absence of bad faith, is relieved of all
obligations to collect, pay, or remit any tax on any transaction involving
"advertising and promotional direct mail" to which the permit, certificate or
statement applies. The purchaser shall source the sale to the jurisdictions to
which the "advertising and promotional direct mail" is to be delivered to the
recipients and shall report and pay any applicable tax due.
3. If the purchaser provides the seller
information showing the jurisdictions to which the "advertising and promotional
direct mail" is to be delivered to recipients, the seller shall source the sale
to the jurisdictions to which the "advertising and promotional direct mail" is
to be delivered and shall collect and remit the applicable tax. In the absence
of bad faith, the seller is relieved of any further obligation to collect any
additional tax on the sale of "advertising and promotional direct mail" where
the seller has sourced the sale according to the delivery information provided
by the purchaser.
4. If the
purchaser does not provide the seller with any of the items listed in
subparagraphs a, b or c of paragraph 1 of subsection A of this section, the
sale shall be sourced according to Reg. § 1.9701(8) -
3(A)(5).
The state to which the "advertising and promotional direct mail" is delivered
may disallow credit for tax paid on sales sourced under this
paragraph.
B.
Notwithstanding Reg. § 1.9701(8) -
3,
the following provisions apply to sales of "other direct mail."
1. Except as otherwise provided in this
paragraph, sales of "other direct mail" are sourced in accordance with Reg.
§ 1.9701(8) -
3(A)(3).
2. A purchaser of "other direct mail" may
provide the seller with either:
(a) A direct
pay permit; or
(b) An agreement
certificate of exemption claiming "direct mail."
3. If the purchaser provides the permit,
certificate or statement referred to in subparagraph a or b of paragraph 2 of
subsection B of this section, the seller, in the absence of bad faith, is
relieved of all obligations to collect, pay or remit any tax on any transaction
involving "other direct mail" to which the permit, certificate or statement
apply. Notwithstanding paragraph 1 sub section B, the sale shall be sourced to
the jurisdictions to which the "other direct mail" is to be delivered to the
recipients and the purchaser shall report and pay applicable tax due.
C. For purposes of this section:
1. "Advertising and promotional direct mail"
means:
(a) Printed material that meets the
definition of "direct mail," in
32 V.S.A. §
9701(28);
(b) The primary purpose of which is to
attract public attention to a product, person, business or organization, or to
attempt to sell, popularize or secure financial support for a product, person,
business or organization. As used in this subsection, the word "product" means
tangible personal property, a product transferred electronically or a
service.
2. "Other
direct mail" means any direct mail that is not "advertising and promotional
direct mail" regardless of whether "advertising and promotional direct mail" is
included in the same mailing. The term includes, but is not limited to:
(a) Transactional direct mail that contains
personal information specific to the addressee including, but not limited to,
invoices, bills, statements of account, payroll advices;
(b) Any legally required mailings including,
but not limited to, privacy notices, tax reports and stockholder reports;
and
(c) Other non-promotional
direct mail delivered to existing or former shareholders, customers, employees,
or agents including, but not limited to, newsletters and informational pieces.
Other direct mail does not include the development of billing
information or the provision of any data processing service that is more than
incidental.
D.
1.
(a) This section applies to a transaction
characterized under state law as the sale of services only if the service is an
integral part of the production and distribution of printed material that meets
the definition of "direct mail."
(b) This section does not apply to any
transaction that includes the development of billing information or the
provision of any data processing service that is more than incidental
regardless of whether "advertising and promotional direct mail" is included in
the same mailing.
2. If
a transaction is a "bundled transaction" that includes "advertising and
promotional direct mail," this section applies only if the primary purpose of
the transaction is the sale of products or services that meet the definition of
"advertising and promotional direct mail."
3. Nothing in this section shall limit any
purchaser's:
(a) Obligation for sales or use
tax to any state to which the direct mail is delivered,
(b) Right under local, state, federal or
constitutional law, to a credit for sales or use taxes legally due and paid to
other jurisdictions, or
(c) Right
to a refund of sales or use taxes overpaid to any jurisdiction.
Reg.§ 1.9701(8) - 5 Telecommunication Sourcing
Definitions.
For the purpose of the Telecommunication Sourcing Rule, Reg.
§ 1.9701(8) -
7,
the following definitions apply:
A.
"Air-to-Ground Radiotelephone Service" means a radio service, as that term is
defined in 4 7 CFR
22.99, in which common carriers are authorized to offer and
provide radio telecommunications service for hire to subscribers in
aircraft.
B. "Ancillary services"
means services that are associated with or incidental to the provision of
telecommunications services including but not limited to detailed
telecommunications billing, directory assistance, vertical service, and voice
mail services.
32 V.S.A. §
9701(42).
C. "Call-by-call Basis" means any method of
charging for telecommunications services where the price is measured by
individual calls.
D.
"Communications Channel" means a physical or virtual path of communications
over which signals are transmitted between or among customer channel
termination points.
E. "Customer"
means the person or entity that contracts with the seller of telecommunications
services. If the end user of telecommunications services is not the contracting
party, the end user of the telecommunications service is the customer of the
telecommunication service, but this sentence only applies for the purpose of
sourcing sales of telecommunications services under Reg. § 1.9701(8) -
7.
"Customer" does not include a reseller of telecommunications service or for
mobile telecommunications service of a serving carrier under an agreement to
serve the customer outside the home service provider's licensed service
area.
F. "Customer Channel
Termination Point" means the location where the customer either inputs or
receives the communications.
G.
"End user" means the person who utilizes the telecommunication service. In the
case of an entity, "end user" means the individual who utilizes the service on
behalf of the entity.
H. "Home
service provider" means the same as that term is defined in the federal Mobile
Telecommunications Sourcing Act,
4 U.S.C. §
124(5).
I. "Mobile telecommunications service" means
the same as that term is defined in the federal Mobile Telecommunications
Sourcing Act,
4 U.S.C. §
124(7).
J. "Place of primary use" means the street
address representative of where the customer's use of the telecommunications
service primarily occurs, which must be the residential street address or the
primary business street address of the customer. In the case of mobile
telecommunications services, "place of primary use" must be within the licensed
service area of the home service provider.
K. "Post-paid calling service" means the
telecommunications service obtained by making a payment on a call-by-call basis
either through the use of a credit card or payment mechanism such as a bank
card, travel card, credit card, or debit card, or by charge made to a telephone
number that is not associated with the origination or termination of the
telecommunications service. A post-paid calling service includes a
telecommunications service, except a prepaid wireless calling service, that
would be a prepaid calling service except it is not exclusively a
telecommunications service.
L.
"Prepaid calling service" means the right to access exclusively
telecommunications services, which must be paid for in advance and which
enables the origination of calls using an access number or authorization code,
whether manually or electronically dialed, and that is sold in predetermined
units or dollars of which the number declines with use in a known
amount.
M. "Prepaid wireless
calling service" means a telecommunications service that provides the right to
utilize a mobile wireless service as well as other non-telecommunications
services including the download of digital products delivered electronically,
content, and ancillary services, which must be paid for in advance, that is
sold in predetermined units of dollars of which the number declines with use in
a known amount. See also Reg. § 1.9771(5) -q(A)(6).
N. "Private communication service" means a
telecommunications service that entitles the customer to exclusive or priority
use of a communications channel or group of channels between or among
termination points, regardless of the manner in which such channel or channels
are connected, and includes switching capacity, extension lines, stations, and
other associated services that are provided in connection with the use of such
channel or channels.
32 V.S.A. §
9701(39); see also Reg.
§ 1.9771(5) -
1(B)(2).
O. "Service address" means:
1. The location of the telecommunications
equipment to which a customer's call is charged and from which the call
originates or terminates, regardless of where the call is billed or
paid.
2. If the location in
subsection (L)(l) is not known, service address means the origination point of
the signal of the telecommunications services first identified by either the
seller's telecommunications system or in information received by the seller
from its service provider, where the system used to transport such signals is
not that of the seller.
3. If the
locations in subsection (L)(l) and subsection (L)(2) are not known, the service
address means the location of the customer's place of primary use.
See also
32 V.S.A. §
9701(19) (definition of
"Telecommunications service");
32 V.S.A. §
9701(42) (definition of
"Ancillary services"); Reg. § 1.9771(5) (Imposition of tax on
telecommunications service and ancillary services).
Reg.§ 1.9701(8) - 6 Telecommunication Sourcing Rule.
A. Except for the defined
telecommunication services enumerated in subsection (C), the sale of
telecommunication service sold on a call-by-call basis shall be sourced to (i)
each level of taxing jurisdiction where the call originates and terminates in
that jurisdiction, or (ii) each level of taxing jurisdiction where the call
either originates or terminates and in which the service address is also
located.
B. Except for the defined
telecommunication services enumerated in subsection (C), a sale of
telecommunications services sold on a basis other than a call-by-call basis is
sourced to the customer's place of primary use.
C. The sale of the following
telecommunication services shall be sourced to each level of taxing
jurisdiction as follows:
1. A sale of mobile
telecommunications services other than air-to-ground radiotelephone service and
prepaid calling service is sourced to the customer's place of primary use as
required by the Mobile Telecommunications Sourcing Act, 4 U.S.C. §§
116-
126. See
32 V.S.A. §
9782.
2. A sale of post-paid calling service is
sourced to the origination point of the telecommunications signal as first
identified by either (i) the seller's telecommunications system, or (ii)
information received by the seller from its service provider, where the system
used to transport such signals is not that of the seller.
3. A sale of prepaid calling service or a
sale of a prepaid wireless calling service is sourced in accordance with Reg.
§ 1.9701(8) -
3.
Provided-however, in the case of a sale of a prepaid wireless calling service,
the rule provided in Reg. § 1.9701(8) -
3(A)(5)
shall include as an option the location associated with the mobile telephone
number.
D. The sale of
internet access service is sourced to the customer's place of primary
use.
E. The sale of directory
assistance service (a taxable ancillary service) is sourced to the customer's
place of primary use. See Reg. § 1.9771(5) -
2 (Tax not
imposed on ancillary services, with the exception of directory assistance
service; definitions of ancillary services).
Reg.§ 1.9701(8) -
7
Admissions to Places of Amusement Sourcing Rule.
The charges for admission to places of amusement is
destination-based. The sale of admission tickets or charges is sourced to the
location of the entertainment or recreation facility.
Reg.§ 1.9701(8) -
8
Access to Programming Sourcing Rule.
The charges for access to cable television systems, other
programming systems, and game or gaming machines under
32 V.S.A. §
9771(4) is sourced to the
customer's residential street address or primary business street
address.
Reg.§ 1.9701(8) -
9 Specified Digital Products
Sourcing Rule.
The charges for sales of specified digital products in
32 V.S.A. §
9771(8) are sourced to the
location of the customer's residential street address or primary business
street address.
Reg.§ 1.9701(19) Telecommunications Service.
See Reg. § 1.9771(5) -
1 (imposition
of tax on telecommunications service, with definitions); Reg. § 1.9701(8)
- 6 (Telecommunication Sourcing Definitions); Reg. § 1.9701(8) -
7
(Telecommunication Sourcing Rule).
Reg.§ 1.9701(42) Ancillary Services.
See Reg. § 1.9771(5) -
2 (tax not
imposed on ancillary services, with the exception of directory assistance
service; definitions of ancillary services).
Reg.§ 1.9701(45) Transferred Electronically.
"Transferred electronically" means obtained by the purchaser
by means other than tangible storage media. The term "transferred
electronically" does not include "ancillary services," "computer software," and
"telecommunications services." See
32 V.S.A. §
9701(42) (definition of
ancillary services);
32 V.S.A. §
9701(19) (definition of
telecommunications services).
Reg.§ 1.9701(47) End User.
A person that purchases products "transferred electronically"
or the code for "specified digital products" for the purpose of giving away
such products or code shall not be considered to have engaged in the
distribution or redistribution of such products or code and shall be treated as
an end user and the transaction is subject to the tax. See
32 V.S.A. §
9701(45) (definition of
"transferred electronically");
32 V.S.A. §
9701(46) (definition of
"specified digital products").
Reg.§ 1.9701(51) Planting Mix.
"Planting mix" means material that:
(A) is used in the production of plants, and
(B) consists of 66% or more of
compost, peat moss, or coir and other ingredients that contribute to fertility
and porosity, including perlite, vermiculite, and other similar
materials.
Reg.§ 1.9707 -
1
Registration of Sellers.
A. The
following persons must register to collect Vermont sales or use tax:
1. Every person making sales of tangible
personal property, services or specified digital products transferred
electronically to an end user, the receipts from which are subject to tax in
Vermont.
2. Every person
maintaining a place of business in the state and making sales, whether at that
place of business or elsewhere, to persons within the state of tangible
personal property, services or specified digital products transferred
electronically to an end user, the use of which is subject to tax.
3. Every person who solicits business in this
state either by employees, independent contractors, agents or other
representatives or by distribution of catalogs or other advertising matter and
by. reason thereof makes sales to persons within the state of tangible personal
property, services or specified digital products transferred electronically to
an end user, the use of which is subject to tax.
4. The State of Vermont or any of its
agencies, instrumentalities, public authorities, public corporations (including
public corporations created pursuant to agreement or compact with another state
or states) or political subdivision when that entity sells services or property
of a kind ordinarily sold by private persons.
5. Every person purchasing tangible personal
property for resale.
6. Every
person receiving receipts from admission charges (including any subsidiary,
service or cover charge), charges incident to, or any charges for the use of
any place of recreation or amusement. See
32 V.S.A. §
9771(4); Reg. §
1.9771(4).
7. A person not
otherwise required to collect Vermont tax who voluntarily collects the
tax.
B. Sellers
Registering Under the Streamlined Sales Tax Agreement
1. A seller registering online under the
Agreement shall be registered in each of the Streamlined Sales Tax member
states.
2. A model 2, model 3, or
model 4 seller may elect to be registered in one or more states as a seller
which anticipates making no sales into such state(s) if it has not had sales
into such state (s) for the preceding 12 months. Such election does not relieve
the seller of its agreement to collect taxes on all sales into such states or
its liability for remitting to the proper states any taxes collected.
Withdrawal or revocation of a member state shall not relieve a seller of its
responsibility to remit taxes previously or subsequently collected on behalf of
the state.
3. A seller is not
required to pay any registration fees or other charges to register in Vermont
if the seller has no legal requirement to register in this state.
4. A seller may cancel its registration under
the system at any time in accordance with uniform procedures adopted by the
Streamlined Sales Tax Governing Board. Cancellation does not relieve the seller
of its liability for remitting to the proper states any tax
collected.
C. Licenses
1. Sellers may register and obtain a sales
tax license online by accessing the online registration system and completing
the appropriate registration form, or may submit to the Commissioner a paper
registration form. In the case of online registration, a written signature from
the seller is not required. Upon registration, the Commissioner shall provide
the seller with a license. Registrants under the Streamlined Sales Tax
Agreement shall register using the Agreement's online Central Registration
System. See Reg. § 1.9707 -
1(B),
above.
2. A seller must obtain a
separate license for each place of business in Vermont, and the license must be
prominently displayed therein. In the case of a mobile seller that sells from
one or more vehicles, each vehicle shall constitute a place of business for
which a license must be obtained.
3. Where a seller has no regular place of
business in Vermont, the application for license shall set forth the place to
which any notice or other communication authorized by Chapter 233 of title 32
shall be mailed.
4. No license
shall be assignable or transferable, but it may be used by the legal
representative of a deceased, incompetent, bankrupt or insolvent
registrant.
5. A seller may be
registered by an agent.
C. Cancellation of a License
The original license is void and must be immediately
surrendered to the Commissioner in the following situations:
1. The business is discontinued.
2. The business is transferred to new owners.
A transfer includes a lease.
3.
When the form of business ownership is changed: for example, when an
unincorporated business incorporates, or a corporation dissolves and one or
more members continue the business in a new form of ownership; or when an
individual doing business changes to a partnership, or when a partnership
changes its members.
D.
Amendment of a License
In the following situations the original license will remain
effective, but the license holder must notify the Department:
1. A change of business or trade name without
a change in ownership.
2. A change
of business location or mailing address.
In such instances the Department will provide the licensee a
corrected license.
E. Amnesty for Registration
Pursuant to the following rules, amnesty is available to
businesses registering under the Streamlined Sales and Use Tax Agreement
(Agreement). To qualify, the business must register via the Agreement's Central
Registration System in all jurisdictions that are members to the
Agreement.
Subject to the limitations in this section:
1. A seller who registers to pay or to-
collect and remit applicable sales or use tax on sales made to purchasers in
the state in accordance with the terms of the Agreement, which seller was not
so registered in the state in the twelve-month period preceding January 1,
2007, shall not be liable for uncollected sales or use tax.
2. Provided a seller registers within twelve
months of January 1, 2007, the Commissioner shall not assess against the seller
uncollected sales or unpaid use tax together with penalty or interest for sales
made during the period the seller was not registered in the state.
3. The Commissioner shall not provide amnesty
to a seller with respect to any matter or matters for which the seller received
notice of the commencement of an audit and which audit is not yet finally
resolved including any related administrative and judicial processes.
4. The Commissioner shall not provide amnesty
for sales or use taxes already paid or remitted to the state or for taxes
collected by the seller.
5. The
amnesty is fully effective, absent the seller's fraud or intentional
misrepresentation of a material fact, as long as the seller continues
registration and continues payment or collection and remittance of applicable
sales or use taxes for a period of at least thirty-six months. There is no
statute of limitations for unfiled returns. See
32 V.S.A. §
9815.
6. The amnesty is applicable only to sales or
use taxes due from a seller in its capacity as a seller and not to sales or use
taxes due from a seller in its capacity as a buyer.
F. The Commissioner will not use registration
with the Central Registration System and collection of. taxes in member states
in determining whether seller has nexus with the State of Vermont for any tax
at any time.
Reg.§ 1.9707 -
2
Registration of Businesses Other than Sellers.
In addition to those taxpayers required to register under
Reg. § 1.9707(1) -
1, the
following entities must register with the Commissioner:
A. An entity that qualifies for exempt status
under
32 V.S.A. §
9743(3) even though sales,
services or amusements charged by or to the organization, or used by the
organization, are not subject to sales and use tax. See Reg. §
1.9743(C).
B. Taxpayers who make
recurring purchases of tangible personal property or withdraw from inventory
for taxable uses tangible personal property upon which no sales tax was paid.
Such taxpayers shall register and report use tax liabilities on returns in
accordance with the filing requirements of
32 V.S.A. §
9775.
Reg.§ 1.9707 -
3
Streamlined Sales Tax Agreement Confidentiality and Privacy Protections for
Model 1 Sellers.
A. The purpose of
this section is to set forth the policy for the protection of the
confidentiality rights of all participants in the system and of the privacy
interests of consumers who deal with Model 1 sellers, as defined in Reg. §
1.9775(E)(3).
B. As used in this
section, the term "confidential taxpayer information" means all information
that is protected under Vermont's laws, regulations, and privileges; the term
"personally identifiable information" means information that identifies a
person; and the term "anonymous data" means information that does not identify
a person.
C. With very limited
exceptions, a CSP shall perform its tax calculation, remittance, and reporting
functions without retaining the personally identifiable information of
consumers.
D. When any personally
identifiable information that has been collected and retained is no longer
required to ensure the validity of exemptions from taxation that are claimed by
reason of a consumer's status or the intended use of the goods or services
purchased and for documentation of the correct assignment of taxing
jurisdictions, such information shall no longer be retained by the
Commissioner.
E. When personally
identifiable information regarding an individual is retained by or on behalf of
the Commissioner pursuant to the Agreement, the Commissioner shall provide
reasonable access by such individual to his or her own information in the
state's possession and a right to correct any inaccurately recorded
information.
F. If anyone seeks to
discover personally identifiable information other than a member state to the
Agreement or a person authorized by that state's law or the Agreement, the
Commissioner shall make a reasonable and timely effort to notify the individual
of such request.
Reg.§ 1.9709 -
1 Records to
Be Kept; General Requirements.
A.
Every person required to collect and every purchaser required to pay the sales
or use tax shall maintain all records that are necessary for a determination of
the correct tax liability. Such records must show the total and individual
sales prices of taxable and nontaxable items.
Such records shall include, but not necessarily be limited
to, the normal books of account ordinarily maintained by the average prudent
business person engaged in the activity in question, together with all bills,
receipts, invoices, cash register tapes, sales slips, or other documents of
original entry supporting the entries in the books of account, as well as all
schedules or working papers used in conjunction with the preparation of tax
returns.
B. All required
records must be made available on request by the Commissioner or the
Commissioner's duly authorized agent or employee.
C. If a taxpayer retains records required to
be retained under this regulation in both electronic and hard-copy formats, the
taxpayer shall make the records available to the Commissioner in the form
requested by the Commissioner.
D.
Nothing in this regulation shall be construed to prohibit a taxpayer from
demonstrating tax compliance with traditional hard-copy documents or
reproductions thereof, in whole or in part, whether or not such taxpayer also
has retained or has the capability to retain records on electronic or other
storage media in accordance with this regulation. The taxpayer is not relieved
of its obligation under the preceding paragraph, however, to provide electronic
records when so requested by the Commissioner.
Reg.§ 1.9709 -
2 Electronic
Records.
A. Electronic records used to
establish tax compliance shall contain sufficient transaction-level detail
information so that the details underlying the electronic records can be
identified and made available to the Commissioner upon request. A taxpayer has
discretion to discard duplicated records and redundant information provided its
responsibilities under this regulation are met.
B. At the time of an examination, the
retained records must be capable of being retrieved and converted to a standard
record format.
C. Taxpayers are not
required to construct electronic records other than those created in the
ordinary course of business. A taxpayer who does not create the electronic
equivalent of a traditional paper document in the ordinary course of business
is not required to construct such a record for tax purposes.
D. Electronic records must contain a level of
record detail that is equivalent to that which is contained in an acceptable
paper record. For example, the retained records should contain such information
as customer name, seller name, invoice number, date, product description,
quantity purchased, price, amount of tax, indication of tax status, shipping
detail, etc. Codes may be used to identify some or all of the data elements,
provided that the taxpayer provides a method that allows the Commissioner to
interpret the coded information.
E.
Business Process Information
Upon the request of the Commissioner, the taxpayer shall
provide a description of the business process that created the retained
records. Such description shall include the relationship between the records
and the tax documents prepared by the taxpayer and the measures employed to
ensure the integrity of the records.
The taxpayer shall be capable of demonstrating:
1. the functions being performed as they
relate to the flow of data through the system,
2. the internal controls used to ensure
accurate and reliable processing; and
3. the internal controls used to prevent
unauthorized addition, alteration, or deletion of retained records.
F. Access to Electronic Records
The manner in which the Commissioner is provided access to
electronic records as required in this regulation may be satisfied through a
variety of means that shall take into account a taxpayer's facts and
circumstances through consultation with the taxpayer:
1. The taxpayer may arrange to provide the
Commissioner with the hardware, software and personnel resources to access the
records.
2. The taxpayer may
arrange for a third party to provide the hardware, software and personnel
resources necessary to access the records.
3. The taxpayer may convert the electronic
records to a standard record format that is agreed to and specified by the
Commissioner.
4. The taxpayer and
the Commissioner may agree on other means of providing access to the
records.
Reg.§ 1.9709 -
3
Alternative Storage Media.
A. For
purposes of storage and retention, taxpayers may convert hard-copy documents
received or produced in the normal course of business and required to be
retained under this regulation to microfilm, microfiche or other storage-only
imaging systems and may discard the original hard-copy documents, provided the
conditions of this regulation are met. The documents must exhibit a high degree
of legibility and readability. Documents that may be stored on these media
include, but are not limited to general books of account, journals, voucher
registers, general and subsidiary ledgers, and supporting records of details,
such as sales invoices, purchase invoices, exemption certificates, and credit
memoranda.
B. Upon request by the
Commissioner, a taxpayer must provide facilities and equipment for reading,
locating, and reproducing any documents maintained on microfilm, microfiche or
other storage-only imaging system.
Reg.§ 1.9701(4) -
3
Bundled Transaction.
A bundled transaction is the retail sale of two or more
products, except real property and services to real property, where (1) the
products are otherwise distinct and identifiable; and (2) the products are sold
for one non-itemized price. A bundled transaction does not include the sale of
any products in which the sales price varies, or is negotiable, based on the
selection by the purchaser of the products included in the transaction.
Except as otherwise provided by this regulation, sales tax
must be collected on the selling price of a bundled transaction if any product
included in the bundled transaction would be taxable if sold separately.
Reg.§ 1.9709 - 4 Records Retention-Time Period.
Records required to be retained under this regulation shall
be preserved for a period of three years in accordance with
32 V.S.A. §
9709 unless the Commissioner or the
Commissioner's duly authorized representative has approved in writing an
earlier date of destruction. The time for retention shall begin to run from the
date on which the taxpayer files the return. In light of
32 V.S.A. §
9815 which allows the Commissioner to assess
tax beyond the three-year period, and
32 V.S.A. §
9813 which places the burden of proving tax
exemptions on the person required to collect the tax, a prudent taxpayer may
choose to retain such records for a longer period of time.
Reg.§ 1.9711 Election by Manufacturer or Retailer.
A person primarily engaged in the business of manufacturing
or the business of making retail sales of tangible personal property may make
an election under Section 9711 to be treated as a retailer when purchasing
materials and supplies to be used in improving, altering or repairing real
property. "Primarily" means more than 50 percent of the business's gross
receipts in the prior calendar year were from manufacturing or retail sales,
respectively.
Section 9741 ("Sales not covered") exempts
specific otherwise-taxable sales from sales and use tax. Sections 9742
("Transactions not covered"), 9743 ("Organizations not covered") and 9744
("Property exempt from use tax") provide additional exemptions from the tax.
If an exemption is "entity-based;" its applicability to a
sales transaction is determined by the identity of either the seller or
purchaser. For example, sales of the United States flag either to or by
veterans' organizations exempt under Section
501(c)(19)
of the Internal Revenue Code are exempt from the tax.
32 V.S.A.
§
9741(33).
If an exemption is "use-based," its applicability to a sales
transaction is determined by the purchaser's actual use of the product. For
example, the sale of fuels used directly and exclusively for farming purposes
is exempt from the tax.
32 V.S.A.
§
9741(27).
If an exemption is "product-based," it is immaterial who
purchases the product or its intended use by the purchaser. For example,
because the exemption for drugs intended for human consumption is a
product-based exemption, aspirin is exempt even if the purchaser uses the drug
to nourish his houseplants, rather than as a human medication.
Exemptions from the sales and use tax are strictly construed.
The burden of proving an exemption is on the person required to collect the
tax.
32 V.S.A. §
9813.
Reg.§ 1.9741(2) Medical Exemption.
Drugs intended for human use, durable medical equipment,
mobility enhancing equipment, and prosthetic devices are exempt from tax.
Supplies, including but not limited to blood, blood plasma, insulin and medical
oxygen are exempt if they are the type commonly and primarily used in
treatment, including self-treatment, intended to alleviate human suffering or
to correct human physical disabilities. Such supplies must be designed
primarily to cure, correct, or reduce the severity of human ailments, injuries
or disabilities. Supplies that are primarily hygienic or preventative in nature
are not exempt.
A. "Drugs," as defined
by
32 V.S.A. §
9701(29), are exempt from
tax. Both prescription and over-the-counter drugs that meet the requirements of
this section are exempt.
1. "Prescription"
means an order, formula or recipe issued in any form of oral, written,
electronic, or other means of transmission by a duly licensed practitioner
authorized by the laws of the state.
2. An "over-the-counter drug," also referred
to as a non-prescription drug, is a drug that contains a label that identifies
the product as a drug as required by 21 C.F.R. §
201.66. Examples of
typical over-the-counter drugs that are exempt from tax include, but are not
limited to: aspirin, ibuprofen and similar pain-relief medications and
analgesics; analgesic salves and liniments; antacids; acne medications,
antiseptics and medicated soaps used for the treatment of infection and skin
diseases; medicated burn remedies; cough and cold medications such as throat
lozenges, cough drops and syrups, decongestants and antihistamines; analgesic
toothache preparations and dental repair kits; eye preparations for the healing
or treatment of the eyes such as contact lens solutions, eye drops, ointments
and washes; laxatives, cathartics and suppositories.
"Over the-counter-drugs" do not include grooming and hygiene
products such as non-medicated soaps and cleaning solutions, non-medicated
shampoo, toothpaste, mouthwash, antiperspirants, and suntan lotions and
screens.
B.
Non-prescription vitamins and dietary supplements are not exempt under
32 V.S.A.
§
9741(2) but are
exempt from tax as food under
32 V.S.A.
§
9741(13); see also
32 V.S.A. §
9701(27) (defining dietary
supplement);
32 V.S.A. §
9701(31) (defining food and
food ingredients).
C. Both "durable
medical equipment" and "mobility-enhancing equipment" are exempt from the tax.
1. "Durable medical equipment" means
equipment, including repair and replacement parts for such equipment, which can
withstand repeated use, is primarily and customarily used to serve a medical
purpose, generally is not useful to a person in the absence of illness or
injury, and is not worn on or in the body.
32 V.S.A. §
9701(30). "Repair and
replacement parts" as used in this definition include all components or
attachments used in conjunction with the durable medical equipment.
Examples of exempt durable medical equipment include bath and
shower chairs, commode chairs, dialysis treatment equipment, drug infusion
devices, feeding pumps, hospital beds, MRis, oxygen equipment, resuscitators,
and x-ray machines. Furniture in a hospital or doctor's waiting room is not
exempt because it does not serve a medical purpose and is not designed to be
used in the treatment of human ailments or disabilities.
2. "Mobility-enhancing equipment" means
equipment, including repair and replacement parts of such equipment, which is
primarily and customarily used to provide or increase the ability to move from
one place to another and which is appropriate for use either in a home or a
motor vehicle, is not generally used by persons with normal mobility, and does
not include any motor vehicle or equipment on a motor vehicle normally provided
by a motor vehicle manufacturer.
32 V.S.A. §
9701(34).
Common examples of exempt mobility enhancing equipment
include wheelchairs, stairlifts, canes, crutches, motorized carts, and walkers.
No prescription is necessary for an item to be characterized as mobility
enhancing equipment.
D. "Prosthetic devices" are exempt from the
tax. "Prosthetic device" means a replacement, corrective, or supportive device,
including repair and replacement parts for such device worn on or in the body
to artificially replace a missing portion of the body, prevent or correct a
physical deformity or malfunction, or support a weak or deformed portion of the
body. 32 V.S. A.§ 9701(35).
Examples of prosthetic devices include artificial limbs,
artificial eyes, prescription eyeglasses and contact lenses, hearing aids,
dentures and dental appliances, electronic voice producing machines, cranial
hair prosthesis, cervical collars, heart valves, pacemakers, orthotic devices,
trusses, and fabric and elastic supports and braces.
E. Supplies used in treatment are exempt from
the tax. The supply must be therapeutic in nature, not normally used by persons
absent illness or injury, and in contrast to durable medical equipment, not
capable of repeated usage.
Examples of supplies that are exempt include bandages and
surgical dressings, hypodermic syringes and needles, disposable heating pads,
and colostomy devices. Examples of supplies not exempt from the tax are body
massage appliances, therapeutic foot baths, room humidifiers and air
conditioners, household baby and bathroom scales, athletic supporters, medic
alert bracelets, and hot tubs.
Reg.§ 1.9741(3) -
1
Agricultural Supplies Exemption.
A.
The agricultural supplies exemption is generally product-based, and the
supplies identified in the first clause of the exemption statute - agriculture
feeds, seed, plants, baler twine, silage bags, agricultural wrap, sheets of
plastic for bunker covers, liming materials, breeding and other livestock,
semen breeding fees, baby chicks, turkey poults, agriculture chemicals other
than pesticides, veterinary supplies, and bedding - are exempt if they are of
the type of product that is typically used in agriculture. For these items, the
seller is not required to obtain an exemption certificate from the purchaser.
See Reg. §§ 1.9745, 1.9741(25) -
7
(discussing exemption certificates).
Agriculture means the science or act of producing agronomic
and horticultural crops, farm products, and raising livestock. Livestock
includes cattle, sheep, goats, equines, fallow deer, red deer, reindeer,
American bison, swine, poultry (including pheasant, chukar partridge, and
coturnix quail), camelids and ratites, rabbits when raised for meat, cultured
fish propagated by commercial fish farms and bees.
B. Where the enumerated exempt items are not
of the type ordinarily used in agriculture, they are exempt only if the
intended use is agricultural. For example, grass seed is in general taxable
because the planting of lawns is ordinarily not an agricultural use. However,
if the seed is used for agricultural purposes, it is exempt. If the seed is
used by a farmer who grows sod for resale, the seller must collect tax on the
seed unless the purchaser provides an exemption certificate.
C. The exemption for fertilizers and
pesticides is use-based because these products are exempt only when used and
consumed directly in the production for sale of tangible personal property on
farms. The seller must collect tax unless the purchaser provides an exemption
certificate.
D. Agricultural
supplies other than fertilizers and pesticides as discussed in subsection (C),
above, and the specific products listed in subsection (A), above, are taxable
unless otherwise exempted by law, even if used in agriculture: Machinery and
equipment are not exempt under this section but may be exempt under the
provisions of
32 V.S.A.
§
9741(25) and Reg.
§ 1.9741(25).
Reg.§ 1.9741(3) -
2 Examples.
The following list is for illustrative purposes only:
1. Feed for feeding pets or other animals not
considered livestock is not exempt because it is not agricultural feed. Pet
food sold by a veterinarian is not considered a veterinary supply and is
taxable.
2. Seed designed and
marketed for feeding wild birds is not an agricultural seed (or feed) and is
taxable.
3. The sale of
agricultural chemicals designed and marketed for use on lawns or for any other
non-agricultural use is taxable.
4.
The sale of flowering plants or shrubs for use in flower gardens and
landscaping is taxable. Fruit trees and vegetable plants are considered
agricultural supplies and are exempt, even when not purchased for commercial
use.
5. The sale of disposable
loose materials, including straw, shavings, sand, sawdust, leaves, and shredded
paper for use where livestock may lie, and the sale of mats made of rubber or
other material specifically designed and sold for bedding farm animals, is
exempt from the tax as the sale of "bedding." The sale of such materials when
packaged and marketed as bedding for pets or other animals not considered
livestock is taxable. "Bedding" in this context means animal bedding and not
plant beds. Potting soil, rocks, sand, gravel, compost, landscape mulch or
similar materials for use in plant beds are not "bedding" within the meaning of
the statute and are not exempt from the tax.
Reg.§ 1.9741(4) -! Casual Sales.
A casual sale of tangible personal property is not subject to
Vermont sales tax. Also, the use in Vermont of tangible personal property
acquired through a casual sale is not subject to use tax. To qualify as a
casual sale, each of the following conditions must apply:
1. The sale must be isolated or
occasional;
2. The seller must not
be regularly engaged in the business of making sales of that general type of
property at retail;
3. The property
must have been obtained by the person making the sale, through purchase or
otherwise, for his or her own use, and
4. The property does not qualify as aircraft
as defined in
5 V.S.A. §
202(6), snowmobiles,
motorboats, or vessels 16 feet or more in length as defined in
23 V.S.A. §§
3201(5),
3302(4),
and
3302(11),
respectively.
Reg.§ 1.9741(4) -
2 Scope of
Exemption.
A person who makes what would otherwise be considered a
casual sale is required to collect and remit sales tax if the sale or series of
sales is sufficient in number, scope and character. The inquiry is a factual
one. Factors to be considered include the frequency of sales, their dollar
volume, whether the sales are advertised, how the sales are advertised, whether
the seller holds sales in a permanent venue, and the sales' similarity to the
seller's normal business activity or operations. As a general rule, a person
engaged in sales activity more than three times per calendar year, held on a
total of more than six calendar days per year, is not making casual
sales.
Reg.§ 1.9741(4) -
3
Examples.
The following examples are for illustrative purposes
only:
A. Casual
Sales
1. Occasional sales of tangible
personal property, originally acquired for the seller's own use, at a moving,
garage or yard sale, or through a classified ad;
2. An insurance agent making an isolated sale
of her office copying machine, or a jeweler selling a used display
case;
3. Sales of tangible personal
property by executors, administrators, trustees, receivers, or other
fiduciaries, except when they continue the operation of a business as sellers
of tangible personal property at retail;
4. Legal sales or executions pursuant to a
court order;
5. Bulk sales of
business assets when ownership of a business or portion of a business is
transferred. See
32 V.S.A. §
3260.
B. Non-Casual Sales
The following sales are not casual sales and unless otherwise
exempted by law, are taxable:
1.
Retail sales by manufacturers or wholesalers, even though such sales are
infrequent and only comprise an insignificant fraction of their total
business;
2. Sales that constitute
an integral part of a business, such as the sale of repossessed fixtures or
other property by a finance company, even though the sale of tangible personal
property is not the primary function of such business;
3. The sale by a business of its used or
outdated equipment in piecemeal fashion over a period of time to either the
same or different purchasers;
4.
The sale of tangible personal property at a flea market by a seller who makes
recurring sales that exceed those allowable under this regulation;
5. Sales made only on a seasonal basis, such
as Christmas tree or wreath sales;
6. Sales by any individual artist or
craftsperson who makes recurring, occasional sales of his or her own handmade
or crafted art or craft objects;
7.
Sales made by an agent for the seller such as those made at consignment stores,
craft fairs or cooperatives, or antique malls;
8. Sales made by auctioneers, except those
exempted under
32 V.S.A.
§
9741(48). Sales made
by auctioneers (including any buyer's premium charged by the auctioneer) are
exempt if:
(a) the auctioneer is licensed
under Vermont Statues title 26, chapter 89;
(b) the auction is conducted on the premises
of the owner of the property and no other person's property is sold in the
auction; and
(c) the property was
obtained by the owner, through purchase or otherwise, for his or her own
use.
Reg.§ 1.9741(12) Motor Vehicles.
The purchase and use of motor vehicles in Vermont is taxed
under Chapter 219 of Title 32 and is exempt from sales and use tax. The
exceptions to the motor vehicle purchase and use tax, enumerated in
32 V.S.A. §
8911, are also exempt from the sales and use
tax. Power take off and other auxiliary equipment on motor vehicles, whether
attached to a motor vehicle prior to or subsequent to the vehicle's
registration, is not exempt from sales and use tax.
Notwithstanding
32 V.S.A. §
8911(5), the Commissioner
may assess sales and use tax on construction, earthmoving, logging and other
motorized equipment if the purchaser, at the time of the assessment, has failed
to register the equipment with the Department of Motor Vehicles (DMV) and
failed to pay the requisite motor vehicle purchase and use tax on such
equipment. The Commissioner shall allow the purchaser sixty (60) days from the
date of assessment in which to register with the DMV. If registered within the
sixty-day period, the Commissioner shall issue the purchaser a credit, to be
applied against the sales and use tax assessment, for the amount of purchase
and use tax paid.
Reg.§ 1.9741(13) Food and Beverages.
Food, food stamps, purchases made with food stamps, food
products and some beverages are exempt. This statutory exemption is limited to
food sold for consumption off the seller's premises. Section
9741(10)
of Title 32, however, provides an exemption for "taxable meals" subject to the
meals and rooms tax, resulting in an exemption from the sales tax for food
whether consumed on or off the seller's premises.
Food, food products and beverages means food and food
ingredients and includes substances, whether in liquid, concentrated, solid,
frozen, dried, or dehydrated form, that are sold for ingestion or chewing by
humans and are consumed for their taste or nutritional value. Food and food
products specifically include candy and dietary supplements. Food, food
ingredients, and beverages do not include soft drinks, alcoholic beverages or
ice which are not exempt from tax under this section. See
32 V.S.A. §
9701(23),
(53) (definition of alcoholic beverages and
soft drinks). Ice is not exempt under this section because it is not sold for
its taste or nutritional value. Beverage container deposits required to be paid
on beverages subject to sales and use tax pursuant to
10 V.S.A. §
1522 are not included within the sales price
of the taxable beverage and are not taxable when separately stated and charged
to the customer. See
32 V.S.A. §
9701(4); Reg. §
1.9701(4) ("Sales price"). If a single charge is made for beverage and deposit,
however, the entire amount is taxable. Reg. § 1.9701(4) -
3.
Reg.§ 1.9741(14) -! Manufacturing Exemption.
Section 9741(14) exempts from sales tax the purchase of
tangible personal property that becomes an ingredient or component part of or
is consumed or destroyed or loses its identity in the manufacture of tangible
personal property for sale; machinery and equipment for use or consumption
directly and exclusively in the manufacture of tangible personal property for
sale or in the manufacture of other machinery or equipment, parts or supplies
for use in the manufacturing process; and devices used to monitor manufacturing
machinery and equipment or the product during the manufacturing process.
Reg.§ 1.9741(14) -
2
Definitions.
A. "Machinery and
Equipment" means tangible personal property, capital in nature, with a useful
life of one year or more, and does not include real property or
supplies.
B. "Manufacturing" means:
1. Industrial processing
2. Food processing
3. Mineral extraction
4. Information processing
C. "Industrial Processing" means
an integrated series of operations, usually involving machinery and equipment,
which changes the form, composition or character of tangible personal property
by physical, chemical or other means.
D. "Food Processing" means an integrated
series of operations, usually involving machinery, which produces a distinct
product for commercial distribution. Food processing includes, but is not
limited to, coffee roasting, milk pasteurization, homogenization and bottling,
meat and meat bi- products processing, beverage and water bottling, canning,
freezing and the production of maple products. Farm or greenhouse operations,
retail operations such as restaurants, grocery stores or butcher shops are
neither "food processing" nor "industrial processing."
E. "Mineral Extraction" means an integrated
series of operations that extract deposits of ore, stone, sand and gravel or
other naturally occurring deposits from the earth. Mineral extraction includes
mine and quarry operations, water and oil wells and gravel pits. Excluded from
mineral extraction are recovery operations from slag piles or grout piles or
other process waste operations.
F.
"Information Processing" means an integrated series of operations in which
information or images are produced and sold as tangible personal property.
Information processing includes the production of newspapers, pamphlets, books,
computer software (such as "canned" or "off the shelf" software), motion
pictures and recorded audio and video tapes, CD ROMs and photographs.
Information processing does not include the preparation of reports, documents,
or statements, in a transaction in which tangible personal property is not the
focus of the transaction.
G.
"Manufacturing Process" means:
1. For
industrial and food processing, the term "manufacturing process" means an
integrated series of production activities beginning with the first production
process and ending with the initial packaging of the product. If the product is
not packaged, the manufacturing process ends with the last step that places the
product in the form in which it is sold. Not included in the term
"manufacturing process" are activities prior to the first production stage
(such as collecting, weighing, testing, and bulk storage of raw materials) or
any activities following initial packaging (such as secondary packaging,
loading, delivery or transportation of finished goods following initial
packaging to storage). The first production stage generally begins at the time
the raw materials that are used or consumed in the manufacturing process are
removed from storage. Thus, for example, conveyors, motorized lifts, cranes,
chain falls and chemical, gas and electrical distribution systems constitute
machinery and equipment used in the manufacturing process and would be exempt
if used exclusively in such process.
2. For the mineral extraction process the
term "manufacturing process" means a series of operations beginning with the
removal of the mineral or overburden from the ground and ending with initial
packaging and includes road construction within the quarry as long as the
construction is a part of an integrated series of events leading to the
extraction of mineral deposits.
3.
For information processing operations, the term "manufacturing process" begins
with the first direct steps in creating the text, image, tape or other product,
through initial packaging. Excluded from the definition are management and
accounting, research and other preparatory activities.
H. "Initial Packaging" means the packaging
used to reach the stage of containment most commonly received by the ultimate
consumers of the product. In a case where a means of containment of a product
is necessary before a continuation of the manufacturing process, initial
packaging will be that stage in the process where the product is in the form in
which retail consumption occurs. Initial packaging does not include freight
cars, trucks, trailers or other such means of transportation even though the
product has not undergone any prior packaging. Also excluded from initial
packaging are pallets, shipping cartons, etc., that are used after initial
packaging and cartons or other shipping materials applied to an otherwise
unpackaged product at a location or time remote from the production of the
product.
Reg.§ 1.9741(14) -
3
Manufacturing Supplies Exemption.
A.
Tangible personal property that becomes an ingredient or component part of
manufactured tangible personal property that will be sold by a manufacturer in
the regular course of its business is exempt.
B. Manufacturing materials and supplies
consumed or destroyed in the manufacture of tangible personal property for sale
are exempt. Tangible personal property that is purchased for use in the
manufacture of tangible personal property for later sale and that has a normal
life expectancy of less than one year in the use to which it is applied will be
considered as consumed or destroyed within the meaning of the exemption. The
question of whether items are consumed or destroyed must be answered on the
basis of the facts and circumstances pertaining to the use in question.
1. "Life expectancy" means physical life
expectancy as a usable item, not obsolescence. An article with a physical life
expectancy of well over a year might become obsolete within a few months.
Nevertheless, it would not be considered as consumed or destroyed within the
meaning of the statute.
2. Property
with a life expectancy of more than one year may be exempt as manufacturing
machinery and equipment, in which case its exemption would rest on the direct
and exclusive test.
C.
Equipment and supplies, including soaps and cleaning compounds, brushes,
brooms, mops and similar items, used for general cleaning and maintenance of
manufacturing or processing property are not exempt from taxation.
D. The phrase "in the manufacture of" shall
be interpreted to exclude the periods before manufacture and after manufacture.
Thus, the exemption does not extend to the procurement of raw materials except
the extraction of mineral deposits and it does not extend to the storage and
transportation of the finished product. Similarly, the exemption does not
extend to administration, sales, advertising and other ancillary activities
that are not an essential and integral part of the manufacturing
process.
E. Protective clothing or
protective equipment, as defined in
32 V.S.A. §
9701(36) will be considered
exempt if worn to protect the integrity of the product, manufacturing process
or the employee during the manufacturing operation.
Reg.§ 1.9741(14) - 4 Equipment, Machinery or Parts Used
Directly and Exclusively in Manufacturing.
A. In General
The purchase of machinery and equipment is exempt from tax if
such machinery and equipment is used directly and exclusively in the
manufacture of tangible personal property for sale, in the manufacture of other
manufacturing machinery and equipment, or in the manufacture of parts or
supplies for use in the manufacturing process.
An electrical distribution system, including electrical
switchgear, transformers, cables, and related equipment used to supply power to
the machinery and equipment that comprise the manufacturing process will be
considered to be machinery and equipment used in the manufacturing process at
the point they are dedicated to such process.
Machinery and equipment employed in pre-production or
post-production is not eligible for exemption. Machinery and equipment used in
non-production activities such as safety, pollution or sound abatement,
administration, general climate control, illumination, general wiring and waste
control is not exempt.
B.
Direct Use
1. In determining whether machinery
and equipment is directly used, the following factors are considered together
with other relevant facts and circumstances:
(a) The active causal relationship that
exists between the use of the machinery and equipment in question and the
production of a product;
(b)
Whether the machinery and equipment in question operates with an exempt machine
or piece of equipment to complete or facilitate an integrated and synchronized
system;
(c) Whether the machinery
and equipment in question guarantees the integrity or quality of the
manufactured product;
(d) The
physical proximity of the machinery and equipment in question to the production
process; lack of physical proximity by itself will not establish that a use is
not direct.
2. The fact
that particular machinery or equipment may be considered essential to the
conduct of the business of manufacturing because its use is required either by
law or practical necessity does not, of itself, mean that the machinery or
equipment is "used directly" in the manufacturing operation.
(a) Machinery or equipment used to test or
inspect the product, or to test or inspect the machinery or equipment used in
the manufacturing process, is directly used in a manufacturing operation.
Similarly, machinery or equipment used to monitor an activity during the
manufacturing process is directly used in a manufacturing operation.
(b) Machinery or equipment used in waste
disposal is not deemed to be directly and exclusively used and is subject to
tax except when the taxpayer affirmatively proves that the waste removal is
both necessary to protect the quality of the product and the waste removal is
integrated into the manufacturing operations. Thus, machinery and equipment
used for periodic cleaning of the production area in an operation not
integrated into the manufacturing operation is not directly used in
manufacturing and is taxable even if manufacturing could not continue unless
the waste was periodically removed from the production area. Machinery and
equipment used for treating or disposing of waste or handling of waste after it
has been removed from the production area is not directly used and is taxable.
Machinery and equipment used to evacuate gases and minerals from the production
area is exempt only when such evacuation is both necessary to guarantee the
quality of the product and is integrated into the manufacturing
operations.
3. Examples
of exempt direct use:
(a) Industrial fans used
to remove noxious gases and particulate matter that would otherwise damage the
manufactured product, when the fans are used contemporaneous with production,
are exempt.
(b) Loaders used within
a quarry to remove and deposit waste rock into trucks for disposal are
exempt.
(c) Exhaust and venting
systems used during the process of roasting coffee beans to remove particulate
emissions, including coffee chaff, are exempt.
4. Examples of taxable indirect use:
(a) Equipment used to control pollution or
provide circulation of air in the production area is not used directly in
manufacturing and is not exempt, even when required by law.
(b) Loaders used to move waste rock and
overburden from slag piles outside the lip of the quarry into trucks for
disposal are not exempt. In addition, trucks used to move the waste from the
yard are not exempt because removal at that juncture neither guarantees the
integrity of the product nor is integrated into the manufacturing
operation.
(c) Whey and salt whey
produced during the process of cheese making is waste, as is contaminated water
produced from washing cheese vats, pipelines, milk separators, milk
pasteurizers, the inside of the milk trucks, and other equipment. Machinery and
equipment used for removal and disposal of such whey, salt whey, wastewater,
and cleaning solutions used in a "clean in place" (CIP) system are not used
directly in manufacturing and are therefore not exempt from tax.
C. Exclusive Use
The purchase or use by a manufacturer of machinery used
directly and exclusively in manufacturing is exempt from tax. The following
uses will not be considered to violate the exclusive use requirement:
1. Uses other than directly in manufacturing
that are isolated or-occasional provided that such uses are limited to no more
than four percent of the time the machinery or equipment is operated;
2. Uses other than directly in manufacturing
that are continuous or regular simultaneous uses or which exceed four percent
of the time the machinery is operated, provided that no more than four percent
of the output of the machinery or equipment is used for purposes other than
directly in manufacturing;
3. Uses
that are exempt under
32 V.S.A.
§
9741(24) (commercial,
industrial or agricultural research or development);
4. Uses that are exempt under
32 V.S.A.
§
9741(25)
(agricultural machinery and equipment).
D. Not Directly and Exclusively Used
1. Generally, buildings and fixtures used to
house manufacturing operations are not directly and exclusively used in
manufacturing even if they are personal property. Personal property that is
directly and exclusively used in the manufacturing process will not lose its
exemption based on the fact that such property also houses the manufacturing
process.
2. Maintenance facilities,
tools, equipment and supplies predominantly used in performing maintenance work
are not exempt because maintenance or repair work is not manufacturing. For
example, chain hoists, tire spreaders, welding equipment, drills, sanders,
wrenches, paint brushes and sprayers, oilers, absorbent compounds, dusting
compounds, air blowers, wipers, and paint or other protective or decorative
coatings are subject to tax. However, replacement parts that are used to
replace worn parts upon exempt machinery and equipment, such as motors, belts,
screws, bolts, cutting edges, air filters or gears, are exempt.
Reg.§ 1.9741(14) - 5 Managerial, Sales or Nonoperational
Activities.
Tangible personal property, machinery or equipment used in
managerial, sales or other nonoperational activities is not directly and
exclusively used in manufacturing and is therefore subject to tax. This
category includes, but is not limited to, tangible personal property, machinery
and equipment used in any of the following activities:
A. Manufacturing and administration. Office
furniture, supplies, and equipment, textbooks and other educational materials,
books and records, and all other tangible personal property including machinery
and equipment used in record keeping and other administrative and managerial
work, whether on or off the production line, is subject to tax. Such property
includes, but is not limited to, supplies used to record the quality and
quantity of work in production or goods in storage, the flow of work, the
results of inspection, or to instruct workers in routing work or other
production activities.
B. Selling
and Marketing. Tangible personal property, including machinery or equipment,
used in advertising or marketing manufactured products for sale, transporting
such products to a market or to customers, or selling such products, is not
within the scope of the manufacturing exemption.
C. Safety and fire prevention. Tangible
personal property, including machinery or equipment used to prevent or fight
fires and supplies used for promotion of safety, accident prevention or first
aid, is subject to tax even if required by law.
Reg.§ 1.9741(14) - 6 Space Heating, Cooling, Ventilation
and Illumination.
Machinery and equipment used to ventilate a building,
lighting for general illumination, air conditioning and other space cooling and
space heating equipment, is subject to the tax. (See Reg. § 1.9741(34) for
the treatment of fuel and electricity used for these purposes.)
Reg.§ 1.9741(14) -
7
Pre-production Activities.
Tangible personal property, including machinery or equipment,
used to transport personnel or to collect, convey, or transport tangible
personal property and storage facilities or devices used to store or "hold"
tangible personal property prior to its use in the first production stage are
subject to tax. (See discussion of "first production stage" in Reg. §
1.9741(14) -
2(G)(1)
).
Reg.§ 1.9741(14) -
8
Post-production Activities.
Tangible personal property, including machinery or equipment,
used to transport or convey the finished product from the final manufacturing
operation and storage facilities or devices used to store the product are not
used directly in manufacturing and are taxable. For example, equipment that
loads packaged products into cases or cartons for ease of handling in delivery
is subject to tax. Machinery, equipment, supplies and other property used to
convey, transport, handle or store the packaged product is also taxable.
Reg.§ 1.9741(14) -
9 Monitoring Machinery and
Equipment.
Devices used to monitor manufacturing machinery and equipment
or the product during the manufacturing process are exempt from tax. To be
considered exempt as monitoring equipment, the device must provide data
necessary to maintain the integrity of the manufacturing process and tools.
Excluded from this category are devices that are used primarily (more than
fifty percent) to gather statistical data, provide security or surveillance of
employees or provide inventory control.
Reg.§ 1.9741(14) -
10 Purchase by Contractors.
Buildings and structural components are not exempt machinery
or equipment. Contractors should pay tax on all such purchases of materials
used to alter or improve real property. Upon occasion a contractor may also
supply machinery and equipment to manufacturers. In that instance, the
contractor may buy such equipment tax free as a purchase for resale by
furnishing his or her supplier with an exemption certificate.
Reg.§ 1.9741(14) -
11 Exemption Certificate.
Purchasers claiming an exemption under the provisions of this
regulation are required to provide to the seller a properly executed exemption
certificate.
Reg.§ 1.9741(15) Newspaper Exemption.
A. Sales of newspapers are exempt from sales
and use tax. The exemption extends to the tangible personal property that
becomes an ingredient or component part of or is consumed or destroyed or loses
its identity in the manufacture of newspapers.
B. There is a two-part test for determining
if a publication qualifies as a newspaper:
1.
First, the publication must be identifiable by its appearance, format and
frequency as a newspaper. A newspaper is a publication that is:
(a) printed on newsprint, rather than on more
durable paper;
(b) not
bound;
(c) printed and distributed
frequently, usually daily or weekly, as opposed to less frequent publication. A
publication printed and distributed less frequently than monthly is presumed to
not qualify for the exemption; and
(d) usually not limited to a single,
specialized subject area.
2. Second, at least ten percent of the
printed material in a publication that meets the criteria of Reg. §
1.9741(15)(B)(1) must consist of news of general or community interest,
community notices, editorial comment, or articles by different authors.
Advertising is not considered news, and is not included within the ten percent
requirement. Note that a publication that does not meet the criteria of Reg.
§ 1.9741(15)(B)(1) will never qualify for the exemption even if ten
percent of its content consists of news.
C. Newspapers and the materials consumed in
producing newspapers are exempt whether or not the newspapers are sold or
distributed without charge. In the case of a publication distributed without
charge that does not qualify as a newspaper (such as a magazine), the purchase
of the paper and supplies used to create the free publication is subject to
sales and use tax because the materials are not purchased for resale. Where the
printing process is performed by a third party, the third party collects tax on
the entire cost of printing the publication, including materials and labor. If
the third- party is not registered to collect the Vermont sales tax, the
distributor/vendor pays use tax on the full purchase price of the publication,
including the materials and labor. A third-party printer is entitled to an
exemption for the materials under
32 V.S.A.
§
9741(14) because the
printing and production constitutes manufacturing.
Reg.§ 1.9741(16) -
1 Packaging
Exemption.
Sales of packing, packaging or shipping materials to
manufacturers or distributors who use such materials for the packing,
packaging, or shipping of tangible personal property for sale are
exempt.
Reg.§ 1.9741(16) -
2 Definition
of Packing, Packaging or Shipping Materials.
"Packing, packaging or shipping materials" means the articles
and devices used in packing, packaging or shipping tangible personal property
such as containers, bags, labels, gummed tapes, bottles, drums, cartons, bubble
wrap and sacks.
Items of returnable and reusable packaging are exempt from
sales and use tax as long as the packaging has a limited life expectancy (not
more than three years) and the item is used by a manufacturer or distributor to
hold or contain or to pack and ship tangible personal property. Examples of
exempt reusable and returnable packaging include pallets, reels and skids used
for holding tangible personal property during shipment, beer kegs, and water
containers. Each of these items may be returned to and reused by the
manufacturer or distributor.
Reg.§ 1.9741(16) -
3
Definition of Manufacturer.
"Manufacturer" means one who performs as a business an
integrated series of operations that places tangible personal property in a
form, composition, or character different from that in which it was
acquired.
Reg.§ 1.9741(16) - 4 Definition of Distributor.
"Distributor" means that person who purchases tangible
personal property from a manufacturer and sells the same at wholesale. One who
sells at retail is not a distributor.
Reg.§ 1.9741(16) - 5 Equipment.
Equipment used for transportation is not exempt as packaging.
An example of nonexempt equipment is a forklift used to transport tangible
personal property around the premises of the manufacturer or distributor. Items
that are not shipped with the tangible personal property are not exempt even if
they are similar to exempt items. For example, specialized pallets used to move
a product around a distributor's or manufacturer's warehouse are not exempt,
although pallets used in shipping the product are exempt.
Reg.§ 1.9741(16) - 6 Sales to Persons Rendering a
Service.
Sales of packing, packaging or shipping materials to persons
regularly engaged in rendering a service are taxable because such persons are
neither manufacturers nor distributors.
Reg.§ 1.9741(16) -
7
Sales to Retail Stores.
Sales of packing, packaging or shipping materials to retail
stores are generally taxable because retail stores are neither manufacturers
nor distributors. This is the case even if the retailer places the product in
the packaging before it is offered for sale at retail. For example, a retailer
buys flour in bulk, and packages the flour in ten-pound bags that are displayed
and offered for sale at its retail store. The flour bags are not exempt because
they were not purchased by a manufacturer or distributor.
Although a manufacturer may make exempt purchases of
packaging and shipping material that is used to package or ship products it
manufactures, sales of packaging and shipping materials such as merchandise
bags are not exempt when the manufacturer uses such materials to package items
it sells directly to customers at retail.
Reg.§ 1.9741(16) -
8
Sales to Restaurants.
Sales of products such as disposable cups, plastic or
styrofoam food containers or other similar packing or shipping materials to
caterers, hotels, restaurants and other eating and drinking establishments
where food is consumed on or off the premises are taxable because such eating
and drinking establishments are not manufacturers or distributors.
Reg.§ 1.9741(16) -
9 Exemption Certificate.
Sales of packing, packaging, or shipping materials are
taxable unless the purchaser provides the seller an exemption
certificate.
Reg.§ 1.9741(24) -
1 Research or
Development Exemption.
Tangible personal property purchased for use or consumption
directly and exclusively, except for isolated or occasional uses, in
commercial, industrial or agricultural research or development in the
experimental or laboratory sense is exempt from sales and use tax.
Reg.§ 1.9741(24) -
2
Definitions.
For the purposes of this provision, the following definitions
shall apply:
A. "Research or
development" means a systematic study or search directed toward new knowledge
or new understanding of a particular scientific or technical subject and the
gradual transformation of this new knowledge or new understanding into an
innovative product or process. Research or development must have as its
ultimate goal:
1. the development of new
products;
2. the improvement of
existing products; or
3. the
development of new uses for existing products.
"Research or development" must go beyond the state of
knowledge in that field, to expand or refine its principles, and must develop
new information that is applied toward development or significant improvement
of a product, process, technique, or invention. It does not include the
modification of a product merely to meet customer specifications unless the
modification is carried out under experimental or laboratory conditions in
order to improve the product generally or develop a new use for the product.
Further, it does not include testing or inspection of materials or products for
quality control, environmental analysis, testing of samples for chemical or
other content, operations research, feasibility studies, efficiency surveys,
management studies, consumer surveys, economic surveys, research in the social
sciences, metaphysical studies, advertising, promotions, or research in
connection with literary, historical, or similar projects. Research or
development ends when assembly or production of the new or improved product or
use of the changed process or technique begins.
B. "Direct use" means those activities that
are an integral part of research or development activities, including all steps
of these activities, but not including secondary activities such as
administration, general maintenance, product marketing, and other activities
collateral to the actual research process.
C. "Exclusive use" means use to the exclusion
of all other uses except for other uses not exceeding four percent of total
use.
D. "Experimental sense" means
work that is conducted through tests, trials, tentative procedures, or policies
adopted under controlled conditions to discover, confirm, or disprove something
doubtful.
E. "Laboratory sense"
means work that is conducted in a place equipped for experimental study in a
science and providing an opportunity for experimentation, observation, or
practice in a field of basic scientific or traditional physical science
research.
Reg.§ 1.9741(24) -
3
Presumption of Exemption.
Tangible personal property used directly and exclusively in
research or development that does not qualify for a federal credit under
Section 41 of the Internal Revenue Code, 26 U.S.C. § 41 shall be presumed
nonexempt under this provision.
Reg.§ 1.9741(25) -
1
Agricultural Machinery and Equipment Exemption.
Sales of agricultural machinery and equipment for use and
consumption predominantly in the production for sale of tangible personal
property on farms (including stock, dairy, poultry, fruit, and truck farms),
orchards, nurseries, or in greenhouses or other similar structures used
primarily for the raising of agricultural or horticultural commodities for sale
are exempt from the sales and use tax.
Reg.§ 1.9741(25) -
2
Definitions.
For the purpose of this regulation:
A. "Agriculture" means the science or act of
producing crops, farm products and raising livestock. Agriculture does not
include lumbering or the growing of trees for logging purposes. The cutting of
trees, except for cutting of Christmas trees, is not considered
agriculture.
B. "Agricultural
machinery or equipment" means machinery or equipment used in producing crops,
obtaining dairy products, raising livestock, and in obtaining maple syrup for
sale. It does not include supplies.
C. "Machinery" means the assemblage of parts
that transmit forces, motion and energy in a predetermined manner.
D. "Equipment" means implements, capital in
nature, ordinarily subject to depreciation, but not including
supplies.
E. Supplies are generally
items of a non-depreciable, non-capital nature that are normally consumed
within a year. Supplies include, but are not limited to, items such as brooms,
brushes, buckets, shovels, and office materials such as ledger books and
pens.
F. Livestock includes cattle,
sheep, goats, equines, fallow deer, red deer, reindeer, American bison, swine,
poultry (including pheasant, chukar partridge, and coturnix quail), camelids
and ratites, rabbits when raised for meat, cultured fish propagated by
commercial fish farms and bees.
G.
"Farm" means an enterprise using land and improvements for agricultural and
horticultural production for the sale of tangible personal property. Farms
include, but are not limited to, enterprises that produce turf crops, forages
and sod crops, grains and feed crops, maple syrup, dairy products, poultry and
apiary products, livestock, Christmas trees, fruits of all kinds including
grapes, nuts and berries, vegetables, nursery, floral, ornamental and
greenhouse products.
Farms do not include cooperatives and similar organizations
that engage in marketing and related activities, commercial operations such as
processing food or dairy products, cheese making, logging and lumbering, the
operation of a stockyard or slaughter house, enterprises for the breeding or
raising of dogs, cats and other pets, and birds, fish or any other animals that
are intended for use in sporting or recreational activities such as hunting and
fishing.
Reg.§ 1.9741(25) -
3
Predominant Use.
A. For agricultural
equipment and machinery to qualify as being used "predominantly" in production
for sale of tangible personal property on a farm, it must be used seventy-five
percent or more of the time in the production for sale of tangible personal
property on farms. It shall be rebuttably presumed that uses are not isolated
or occasional if they total more than four percent of the time the machinery or
equipment is operated. The exemption status is dependent upon the actual use of
such machinery and equipment; the machinery and equipment is not exempt solely
on the basis that it is used on a farm.
B. Tangible personal property that is
incorporated into real property is not used in the production of farm products
and so is not exempt. Materials used to construct barns, sheds, silos and
permanent fences are not exempt as they are building materials, not machinery
or equipment. Movable equipment is exempt if the item is not incorporated into
real property and it is used for farm production. Examples of such equipment
are: barn curtains and screens, adjustable headlocks, free- stall stations,
calf gates, movable fence gates, portable or temporary calf housing, milking
machines and temporary fencing systems.
Reg. § 1.9741(25) - 4 Examples of Use in Farm
Production.
The following uses are considered uses in the production for
sale of tangible personal property on farms. If the machinery or equipment is
used at least seventy-five percent of the time for any of these uses, or a
combination of these uses, the machinery and equipment is exempt from
tax.
1. Machinery and equipment used to
cause other property to become a constituent or component of a farm product; to
cause other property to be consumed by productive animals; machinery and
equipment used to till, plant, fertilize, foster plant growth or harvest; to
feed and water livestock; and to administer medication to livestock, to
maintain sanitary conditions or health conditions in the immediate area of
agricultural production;
2.
Machinery and equipment used to collect, convey or transport property used in
production to an agricultural production site ot to transport the finished
product to a storage site on the farm and machinery used to collect
manure
3. Machinery and equipment
used to clean farm production equipment;
4. Machinery and equipment used to test and
inspect the agricultural product;
5. Machinery and equipment used in
agriculture to handle and preserve agricultural products upon the premises, and
to prevent or deter the destruction, injury or spoilage of agricultural
products, livestock or plants. This category includes but is not limited to
property such as automatic cattle oilers used to groom farm animals so as to
preserve their health, manure gutter cleaners, refrigerating devices used upon
the premises to cool raw milk or to preserve perishable vegetables or other
agricultural products, but does not include items such as permanent fences,
silos, and barns;
6. Machinery and
equipment used to extract or separate an agricultural product from livestock,
the soil or plants, including but not limited to harvesters, combines, binders,
forage blowers, milking equipment, egg collecting equipment, pickers and feed
handling equipment;
7. Replacement
parts used to replace worn parts upon exempt machinery and equipment including
but not limited to motors, belts, screws, bolts, cutting edges, tractor
batteries, tractor tires, and air filters or gears;
Machinery and equipment used to convert animal waste or other
farm byproducts into energy when that energy is used for agricultural purposes,
except for isolated or occasional uses not to exceed twenty-five percent of
total usage. Note, however, that machinery and equipment used to convert animal
waste or other farm byproducts into energy for sale at retail may be exempt
under the manufacturing exemption. See
32 V.S.A.
§
9741(14); Reg. §
1.9741(14).
Reg.§ 1.9741(25) - 5 Examples of Uses of Machinery and
Equipment Not in Use for Production of Tangible Property for Sale.
The following uses are not uses in the production for sale of
tangible personal property on farms. If the machinery or equipment is used more
than twenty-five percent for the following uses, or a combination of these
uses, the machinery and equipment is subject to tax.
1. Machinery and equipment purchased or used
by one engaged in agriculture for use in the construction, reconstruction,
alteration, remodeling, servicing, repairing, maintenance, or improvement to
real estate, even though the structure may house or otherwise contain equipment
or other facilities used in agriculture;
2. Machinery and equipment purchased or used
for land reclamation, land clearing, landscaping, lawnmowing, snow removal and
similar activities that are intended to improve or preserve real
estate;
3. Machinery and equipment
used in maintaining facilities including but not limited to general cleaning
and maintenance of property not used in direct farm production, such as chain
hoists and welding equipment.
4.
Property used in managerial, marketing and sales or other non-operational
activities including, but not limited to office furniture, supplies and
equipment, textbooks and other educational materials, books and records, and
all other property used in agricultural administration and management, and
machinery and equipment used in advertising agricultural products for
sale;
5. Property used in the
exhibition of agricultural products or agricultural operations including, but
not limited to blankets, halters, prods, leads, harnesses, dressings, ribbons,
clippers and similar show or grooming and display equipment;
6. Property used to prevent or fight fires
and equipment and supplies used for safety, accident prevention or first aid
programs, even though such equipment or property is required by law;
7. Property used for the personal comfort or
convenience of a person engaged in agriculture, or his or her family,
employees, or business associates, such as beds, mattresses, blankets,
tableware, stoves, refrigerators, and other equipment used in conjunction with
the operation of a migrant labor camp, or facilities for agricultural
employees;
8. Machinery and
equipment used in making butter, sausage, canned goods, jellies, flour, juices,
cheeses, ice cream and other like items. Note, however, that such machinery and
equipment may be exempt under the manufacturing exemption. See
32 V.S.A.
§
9741(14); Reg. §
1.9741(14);
Reg.§ 1.9741(25) - 6 Nurseries.
Machinery and equipment purchased by a person engaged in
commercial nursery operations for use predominantly in the direct production of
tangible personal property for sale is exempt. Included is machinery and
equipment used in the production process of growing ornamental trees,
shrubbery, vegetable plants, flowers, Christmas trees and fruit trees.
Reg.§ 1.9741(25) -
7
Agricultural Exemption Certificate.
A.
A person engaged in the production for sale of agricultural products shall
provide a completed agricultural exemption certificate to his or her supplier
to cover purchases of exempt agricultural machinery and equipment.
B. Sales that are not supported by a properly
executed exemption certificate shall be deemed taxable retail sales.
C. A blanket agricultural exemption
certificate may be furnished to the seller to cover additional purchases of the
same general type of agricultural machinery and equipment.
D. Each sales slip or purchase invoice based
on a blanket exemption certificate must show the name, address and federal
identification number of the purchaser.
Reg.§ 1.9741(26) -
1 Residential
Fuel Exemption.
Sales of fuel used in a residence for domestic use are
exempt. "Fuels" shall include electricity, oil, kerosene,, natural gas,
propane, wood, coal, and any similar product.
Reg.§ 1.9741(26) -
2 Definition
of Residence.
"Residence" shall mean any dwelling, apartment, mobile home
or other place that is normally used as a living place and may be either a
primary or secondary residence. "Residence" shall not include motels, hotels,
inns, time shares, vacation clubs, nursing homes as defined in 33 V. S.A.
§
7102,
tourist homes, or similar housing arrangements.
Reg.§ 1.9741(26) -
3
Definition of Domestic Use.
"Domestic use" includes heating of space or water, lighting,
air conditioning, and the operation of appliances in a residence.
Reg.§ 1.9741(26) - 4 Collection of Tax.
It shall be the responsibility of the seller of fuel to
determine whether any sale is taxable or exempt, and to collect the sales tax
on all taxable sales. All sales of fuel shall be taxable unless determined to
be exempt in whole or in part in accordance with this regulation.
Reg. § 1.9741(26) - 5 Presumption of Exemption.
In making the determination required by this regulation, a
seller shall be entitled to presume that sales of all fuels are exempt where
all electricity or gas used at the property to which such fuel is delivered is
billed at a residential rate under applicable regulations or tariffs
established or approved by the Public Service Board.
Reg.§ 1.9741(26) - 6 Multiple Use.
When a property is used for both exempt and nonexempt
purposes and the fuel for such property is not separately metered, measured or
purchased, the purchaser shall certify to the seller, at the seller's request,
the portion of fuel purchased for domestic purposes and thus entitled to
exemption. Such certification may be an estimate, based upon any reasonable
method of estimation.
Reg.§ 1.9741(26) -
7
Area Lighting.
Charges for "area lighting" which include a charge for the
use of equipment as well as for the fuel used to operate such equipment shall
be exempt from tax if used at a property used exclusively as a
residence.
Reg.§ 1.9741(27) -
1 Exemption
for Fuels Used Directly and Exclusively for Farming Purposes.
Sales of fuel used directly and exclusively for farming
purposes shall be exempt from sales tax. "Fuels" shall include electricity,
oil, kerosene, natural gas, propane, wood, coal, and any similar
product.
Reg.§ 1.9741(27) -
2 Definition
of Farm.
"Farm" means an enterprise using land and improvements for
agricultural and horticultural production for the sale of tangible personal
property. Farms include, but are not limited to such enterprises producing turf
crops, forages and sod crops, grains and feed crops, maple syrup, dairy
products, poultry and apiary products, livestock, fruits of all kinds including
grapes, nuts and berries, vegetables, nursery, floral, ornamental and
greenhouse products. Livestock includes cattle, sheep, goats, equines, fallow
deer, red deer, reindeer, American bison, swine, poultry (including pheasant,
chukar partridge, and coturnix quail), camelids and ratites, rabbits when
raised for meat, cultured fish propagated by commercial fish farms and
bees.
Farms do not include cooperatives and similar organizations
that engage in marketing and related activities, commercial operations such as
processing food or dairy products, cheese making, logging and lumbering, the
operation of a stockyard or slaughter house, enterprises for the breeding or
raising of dogs, cats and other pets, and birds, fish or any other animals that
are intended for use in sporting or recreational activities such as hunting and
fishing.
Reg.§ 1.9741(27) -
3
Scope.
Directly and exclusively used for farming purposes includes
the operation of any equipment exempt under
32 V.S.A.
§
9741(25). It also
includes lighting in farm buildings or area lighting of farm property, heating
of farm buildings, and operation of equipment incidental to the operation of
the farm. Heating and lighting of farmstands on the premises of the farm is
exempt if the farmstand sells primarily or exclusively products grown on the
farm.
Reg. § 1.9741(27) - 4 Collection of Tax.
It shall be the responsibility of the seller of fuel to
determine whether any sale is taxable or exempt, and to collect the sales tax
on all taxable sales. All sales of fuel shall be taxable unless determined to
be exempt in whole or in part in accordance with this regulation.
Reg. § 1.9741(27) - 5 Certificate of Exemption.
Purchasers claiming an exemption under the provisions of this
regulation are required to provide to the seller a properly executed exemption
certificate.
Reg.§ 1.9741(27) - 6 Multiple Use.
When a property is used for both exempt and nonexempt
purposes, the purchaser of fuel for such property, when the fuel is used for
both exempt and nonexempt uses and is not separately metered, measured or
purchased, shall certify to the seller, at the seller's request, the portion of
fuel purchased for domestic purposes and thus entitled to exemption. Such
certification may be an estimate, based upon any reasonable method of
estimation.
Reg.§ 1.9741(34) -
1 Exemption
for Fuel Used Directly or Indirectly in Manufacturing.
Fuels used directly or indirectly in manufacturing tangible
personal property for sale are exempt from sales and use tax. "Fuels" shall
include electricity, oil, kerosene, natural gas, propane, wood, coal, and any
similar product.
Reg.§ 1.9741(34) -
2
Definitions.
Fuel is used directly in manufacturing if used for activities
that qualify as direct manufacturing defined under
32 V.S.A.
§
9741(14).
Fuel is used indirectly in manufacturing if used for the
following purposes:
1. operation of
machinery and equipment directly associated with production, such as pollution
abatement equipment, equipment required by VOSHA/OSHA regulations, lighting or
cranes for quarries or gravel pits, and other similar machinery and
equipment;
2. receiving and storing
raw materials;
3. testing quality
control of products;
4. storing
finished products at the production area up to initial shipping;
5. heating, cooling and lighting of the
production area, of areas used for purposes 1 through 4 above, and of
corridors, restrooms, and other spaces which are integral to the manufacturing
area.
Reg.§ 1.9741(34) -
3
Nonexempt Activities.
Fuel used in the following activities is not used directly or
indirectly in manufacturing, and therefore not exempt under this
provision:
1. administration;
2. sales or marketing;
3. retail operations, including storage at a
retail outlet;
4. distribution
operations;
5. ancillary activities
such as meeting, dining, child care, automobile parking;
6. research and development. Note, however,
that fuel used directly for research and development is exempt under
32 V.S.A.
§
9741(24).
Reg.§ 1.9741(34) - 4 Determination of the Exempt Portion
of Purchases.
When there are both exempt and nonexempt uses of fuel, the
taxpayer must accurately determine the amount of fuel that is exempt from sales
and use tax. Acceptable means of such determination include the use of separate
meters or fuel storage tanks. Taxpayers may also determine the percentage of
floor space used primarily for qualified purposes and allocate usage according
to the resulting percentage, provided floor space accurately reflects fuel
usage. Taxpayers should maintain spec sheets, assets lists, detailed floor
plans and any other necessary documentation to substantiate the exempt use of
fuel, which information is subject to the Department's review upon request. If
the means described herein do not address a particular taxpayer's fuel usage,
such Taxpayer may petition the Department for an alternate methodology that is
acceptable to the Department.
Reg.§ 1.9741(34) - 5 Certificate of Exemption.
A seller that has accepted from the purchaser a properly
executed exemption certificate as set forth in
32
V.S.A. §
9745 and Reg. § 1.9745
shall not be required to collect tax on the items claimed as exempt. The
certificate shall specify either that all purchasers are exempt or the
percentage of the purchases that are taxable and the percentage that are
exempt. A purchaser that submits an exemption certificate to a seller must have
made a determination as required under Reg. § 1.97 41 (34)-4, and must
maintain supporting information, which information shall be reviewed and
updated, if necessary, every three years. As stated under Reg. §
1.9741(34) - 4, this information is subject to review by the Department, and if
deemed incomplete or inaccurate, any exemption certificate submitted by the
taxpayer will be considered invalid, and the taxpayer will be liable for any
unpaid tax, plus penalty and interest, as provided under
32 V.S.A. §
9777.
Reg.§ 1.9741(34) - 6 Example.
XYZ corporation uses electricity to operate machinery that
produces a product for sale, to operate office equipment and to provide
lighting throughout its site. The site contains administrative offices, a
warehouse for finished goods awaiting sale, and a production area.
The electricity purchased for use at the warehouse and in the
production area, both for running the production equipment and for providing
lighting, is exempt. Electricity purchased for use in the administrative
offices is not exempt.
To determine the percentage of exempt and nonexempt
electricity, XYZ corporation observes the electricity used in similarly sized
and equipped offices and determines that only 15 percent of its electricity is
used in portions of the site not primarily used for manufacturing. XYZ
corporation gives its supplier an exemption certificate claiming an exemption
for 85 percent of the electricity.
Reg.§ 1.9741(51) Specified Forestry Equipment and Parts.
The following specified forestry equipment and repair parts
for these pieces of equipment, used in timber cutting, timber removal and the
processing of timber and solid wood forest products intended to be sold at
retail are exempt from tax: skidders with grapple and cable, feller bunchers,
cut-to-length processors, forwarders, delimbers, loader slashers, log loaders,
whole-tree chippers, stationary screening systems, and firewood processors,
elevators, and screens.
Other machinery and equipment not listed here not exempt from
tax even if used for the forestry purposes listed in
32 V.S.A.
§
9741(51).
Section 1.9771 IMPOSITION, RATE AND PAYMENT
Reg.§ 1.9771(3) -
1 Tax on
Fabrication.
Section 9771(3) imposes the sales tax on the charge for
producing, fabricating, printing or imprinting of tangible personal property
for consideration for consumers who furnish either directly or indirectly the
materials used in the producing, fabricating, printing or imprinting.
Reg.§ 1.9771(3) -
2 Activity
That Constitutes Fabrication.
A.
Fabrication is similar to manufacturing because in most instances a new part or
shape is produced or manufactured, material is added or taken away, or
appearance or makeup of the item is altered.
B. Custom manufacturing is not fabrication
unless the customer directly or indirectly supplies the materials used. A
separate charge for the labor of producing the product sold is part of the
sales price. See Reg. § 1.9701(4).
C. Examples:
1. John contracts with Jim to make draperies.
Jim charges John $ 50 for the material used and $ 100 for the labor. This does
not constitute fabrication because John did not provide the material directly
or indirectly. Jim collects tax on the $ 150 sales price.
2. John purchases materials for draperies
from Jim for $ 50 and contracts with Joan to create the draperies from the
material for $ 100. Jim collects tax from John on the $ 50 sales price of the
material, and Joan collects tax from John on the $ 100 fabrication
charge.
3. John purchases material
for draperies from Jim for $ 50, then separately contracts with Jim to create
the draperies from the material for $ 100. It is not necessary to determine
whether there were two separate transactions; Jim collects tax on the full $
150 (tax on the sales price of the material, and tax on the fabrication
charge).
4. John brings Jim
material he received as a gift and contracts with Jim to create draperies from
the material for $ 100. Jim collects tax on the $ 100 fabrication
charge.
Reg.§ 1.9771(3) -
3
Test of Taxability.
A. If labor is
expended in producing a new or different item, the tax applies to the labor
charge.
B. If labor is expended in
repairing or altering existing property belonging to another to restore that
item to its original condition or usefulness without producing new parts, the
tax does not apply to the labor charge.
C. "New item" means new insofar as the
ultimate purchaser (first retail sale) is concerned. Work may be performed at
various stages before the item is ready for use by the ultimate purchaser.
Similarly, the cost of repairing, remodeling or reconditioning an item is
subject to tax if a new or different item from the original is produced by such
services.
D. The exemptions
available for sales of tangible personal property are also available for
fabrication charges. For example, a charge for fabrication of an article of
clothing is not taxable.
Reg.§ 1.9771(3) - 4 Examples.
Fabrication subject to the tax includes, but is not limited
to:
job printing, engraving (jewelers included), lettering
memorials and monuments, silk screen printing (with the exception of printing
on items not subject to sales tax, such as clothing), custom drapery,
taxidermy, sign making (with the exception of sign making on property not
subject to sales tax, such as real estate or motor vehicles), remaking bearings
(enlarging the diameter of the bearing to accommodate a larger size shaft or
turning down the shaft to a smaller diameter) and machine work to make new
parts or to change existing parts into new items.
Reg.§ 1.9771(4) -
1 Receipts
From Admissions to Places of Amusement.
A tax is imposed on the receipts from charges for admission
to places of amusement, access to cable television systems or other audio or
video programming systems that operate by wire, coaxial cable, lightwave,
microwave, satellite transmission or by other similar means, and charges for
access to any gaming or amusement machine, apparatus or device, excluding video
game, pinball, musical, vocal or visual entertainment machines that are
operated by coin, token or bills.
32 V.S.A. §
9771(4). For the purpose of
this regulation, "amusement charge", means the charge for an admission to a
place of amusement or for a service taxed under this subsection.
A. "Place of amusement" is broadly defined to
mean any place where any facilities for entertainment, recreation, amusement or
sports are provided.
32 V.S.A. §
9701(11).
Examples include, but are not limited to:
(1) places where athletic events,
exhibitions, dramatic and musical performances are held, or where motion
pictures are shown;
(2) athletic
facilities or gyms, golf courses and ski areas, and
(3) places where gaming or amusement
machines, apparatus or devices are available.
B. The tax is imposed on the right to
admission or to the service. There is no deduction for lack of use or
non-attendance unless the seller issues a refund to the customer in cash or a
credit.
C. Service charges, cover
charges or other subsidiary charges are considered part of the amusement charge
and are taxable. Charges for membership, including dues, initiation fees and
other charges made by organizations or clubs are considered amusement charges
if the primary purpose of the membership is access to a place of
amusement.
D. Taxable amusement
charges include, but are not limited to:
1.
Charges to attend athletic and sporting events including baseball, football,
basketball and hockey games, boxing and wrestling events, races, motor sport
events, rodeos and derbies;
2.
Charges for the use of health clubs and athletic facilities including
gymnasiums, tennis or handball courts, swimming pools, saunas, hot tubs and
steam baths, skating rinks, shooting ranges, golf courses, driving ranges and
practice greens, batting cages, bowling alleys, billiard halls, campgrounds,
and ski areas;
3. Charges in the
form of dues, fees or season tickets that entitle a person to club or
organization membership privileges where the principal or sole privilege of
such membership is the right to admission to particular performances or to a
particular place for entertainment, recreation or amusement;
4. Charges for admission to observatories,
zoos, and museums (admission charges to nonprofit museums, however, are exempt
under
32 V.S.A.
§
9741(2));
5. Charges for admission to tent shows,
circuses, carnivals, celebrations, festivals, dances and balls, bingo halls,
craft fairs, flea markets, collector shows (for example, gun, antique,
car);
6. Charges for sleigh or
buggy rides, airplane, helicopter, boat, and glider rides where the purpose is
amusement rather than transportation;
7. Charges for pleasure rides of all kinds
commonly conducted at amusement parks; fairs, circuses, carnivals and street
festivals, as well as charges, for the use of devices and games for testing
skill or strength such as shooting galleries, striking machines and other
similar machines most commonly found at fairs, circuses or carnivals;
8. Charges for tours of manufacturing or
other facilities;
9. Cover charges
for restaurants or cabarets providing entertainment;
10. Charges for the use of riding trails,
tracks or similar facilities for skiing, horseback riding, bicycling,
snowboarding, skating, canoeing, kayaking, or for using ATVs, snowmobiles,
motorcycles, or other recreational equipment. (Where the seller makes a
separate charge for use of the equipment, that charge is taxable as a rental of
tangible personal property, rather than as an amusement charge.)
E. The following non-exclusive
list is illustrative of charges that are not taxable as amusement charges:
1. Charges for classes or instruction in
athletics or recreation, or in the use of athletic or recreational equipment,
that may allow access to a recreational facility solely for the purpose of the
instruction. If the class includes access to the recreational facility beyond
the scope of that required for the class or instruction, however - for example,
continued access to a ski area or golf course for the remainder of the day
after completion, of the class or instruction -the charge must be allocated
between the non-taxable instruction and the taxable charge for use of the
facility. If charges for admission to a place of amusement include optional
access to classes or instruction, the full charge is taxable. For example, a
gym membership charge is fully taxable even though a member may choose to take
aerobics or other instruction at no additional cost to the member. If the gym
offers classes or instruction for an optional cost above the charge for
membership, and such cost is separately stated and charged, the additional fee
is not taxable;
2. Charges that
constitute dues paid to fraternal, civic or service organizations even though
the price paid for dues entitles the member to use whatever facilities for
recreation or amusement that may be available. (If the organization makes a
separate charge in addition to the dues for the use of such facilities, the
charge is subject to tax);
3.
Charges for the use of video games, pinball, musical, vocal or visual
entertainment machines operated by coin, token or bill. The exemption applies
only to the money or token that actually operates the machines. (A cover charge
or other payment required, for the use of the machines is an amusement charge
and is taxable.)
F. The
following amusement charges are exempt pursuant to other statutory provisions:
1. Fees and charges paid for admission to or
use of federal, state or municipal recreation areas and facilities, including
swimming pools.
32 V.S.A.
§
9741(18);
2. Charges for admission to non-profit
museums.
32 V.S.A.
§
9741(20);
3. Amusement charges charged by or paid to
organizations expressly excluded from the tax under
32 V.S.A. §
9743 ("Organizations not covered"); see also
Reg. § 1.9743.
Reg.§ 1.9771(4) -
2 Multiple
Location Admissions.
In those instances where tickets, passes, vouchers or any
other right entitle purchasers to choose an admission location or multiple
admission locations from two or more places of amusement, the charge for each
individual admission is considered a separate and distinct charge that is
received at the place of amusement where the ticket, pass, voucher, or right is
redeemed.
The seller may collect the tax only on the portion of the
charge attributable to the right to access to the Vermont facility as
follows:
A. The seller shall initially
determine the charge attributable to the Vermont facility or facilities by
allocating the proportion of the total charge that is reasonably anticipated to
be used in Vermont, as compared to the reasonably anticipated use of all
facilities for which the charge provides access. The seller shall base the
estimate of reasonably anticipated use on past experience, adjusted for changes
in marketing or facilities that can be expected to result in a different
proportion for the current year.
B.
The seller may make the charge on a "tax included" basis if the Commissioner
grants such approval pursuant to
32 V.S.A. §
9708(b). Alternatively, the
sales tax may be separately stated on the charge for the Vermont
facilities.
C. The seller shall
perform a reconciliation after close of its fiscal year. The reconciliation
shall determine the charge attributable to the Vermont facilities by comparing
the actual use of the Vermont facilities to the actual use of all facilities
during the year as a proportion of the total charges.
D. The difference between the Vermont taxable
sales as determined by the reconciliation and the amount previously reported in
the initial allocation shall be reported as sales for the period including the
second month after the close of the seller's fiscal year.
Reg.§ 1.9771(5) -
1
Telecommunications Service.
Vermont sales and use tax is imposed on all
telecommunications service, as defined in 32 V.S.
A.
§ 9701(19), except for paging
service, private communications service, value-added non-voice data service,
and coin-operated telephone service. Vermont sales tax is not imposed on
ancillary services, as defined in
32 V.S.A. §
9701(42), except for
directory assistance service.
See also Reg. § 1.9701(8) - 6 ("Telecommunications
Sourcing Definitions");
32 V.S.A. §
9701(43) (definition of
"Telecommunication nonrecurring charges").
A. Taxable Telecommunications Services
Taxable telecommunications services include the following
defined services:
1. "800 service"
means a telecommunications service that allows a caller to dial a toll-free
number without incurring a charge for the call. The service is typically
marketed under the name "800", "855", "866", "877", and "888" toll-free
calling, and any subsequent numbers designated by the Federal Communications
Commission.
2. "900 service" means
all inbound toll telecommunications service purchased by a subscriber that
allows the subscriber's customers to call in to the subscriber's prerecorded
announcement or live service. "900 service" does not include the charge for:
collection services provided by the seller of the telecommunications services
to the subscriber, or services or product sold by the subscriber to the
subscriber's customer. The service is typically marketed under the name "900"
service, and any subsequent numbers designated by the Federal Communications
Commission.
3. "Fixed wireless
service" means a telecommunications service that provides radio communication
between fixed points.
4. "Mobile
wireless service" means a telecommunications service that is transmitted,
conveyed or routed regardless of the technology used, where the origin and/or
termination points of the transmission, conveyance or routing are not fixed,
including, by way of example only, telecommunications services that are
provided by a commercial mobile radio service provider.
5. "Prepaid calling service" means the right
to access exclusively telecommunications services which must be paid for in
advance and which enables the origination of calls using an access number or
authorization code, whether manually or electronically dialed, and that is sold
in predetermined units or dollars of which the number declines with use in a
known amount.
6. "Prepaid wireless
calling service" means a telecommunications service that provides the right to
utilize a mobile wireless service as well as other non-telecommunications
services including the download of digital products delivered electronically,
content, and ancillary services, which must be paid for in advance that is sold
in predetermined units of dollars of which the number declines with use in a
known amount.
B.
Non-taxable Telecommunications Services
The following telecommunications services are not subject to
the tax:
1. "Paging service" means a
telecommunications service that provides transmission of coded radio signals
for the purpose of activating specific pagers; such transmission may include
messages and/or sounds.
32 V.S.A. §
9701(38).
2. "Private communications service" means a
telecommunications service that entitles the customer to exclusive or priority
use of a communications channel or group of channels between or among
termination points, regardless of the manner in which such channel or channels
are connected, and includes switching capacity, extension lines, stations, and
other associated services that are provided in connection with the use of such
channel or channels.
32 V.S.A. §
9701(39).
3. "Value-added non-voice data service" means
a service that otherwise meets the definition of telecommunication services in
which computer processing applications are used to act on. the form, content,
code, or protocol of the information or data primarily for a purpose other than
transmission, conveyance or routing.
32 V.S.A. §
9701(40).
4. "Coin-operated telephone service" means-a
telecommunications service paid for by inserting money into a telephone
accepting direct deposits of money to operate.
32 V.S.A. §
9701(41).
Reg.§ 1.9771(5) -
2 Ancillary
Services.
Vermont sales and use tax is not imposed on ancillary
services, as defined in
32 V.S.A. §
9701(42), except for
directory assistance service.
A.
Taxable Ancillary Service
1. "Directory
assistance" means an ancillary service of providing telephone number
information, address information, or both. See
32 V.S.A. §
9701(44).
B. Non-taxable Ancillary Services
Non-taxable ancillary services include the following:
1. "Conference bridging service" means an
ancillary service that links two or more participants of an audio or video
conference call and may include the provision of a telephone number. Conference
bridging service does not include the "telecommunications services" used to
reach the conference bridge.
2.
"Detailed telecommunications billing service" means an ancillary service of
separately stating information pertaining to individual calls on a customer's
billing statement.
3. "Vertical
service" means an ancillary service that is offered in connection with one or
more "telecommunications services," which offers advanced calling features that
allow customers to identify callers and to manage multiple calls and call
connections, including "conference bridging services."
4. "Voice mail service" means an ancillary
service that enables the customer to store, send or receive recorded messages.
Voice mail service does not include any "vertical services" that the customer
may be required to have in order to utilize the voice mail service.
Reg.§ 1.9771(8) Specified Digital Products Transferred
Electronically.
Specified digital products transferred electronically to an
end user are subject to the sales tax.
The retail sale of "digital code" is subject to the tax.
"Digital code" means a code which provides a purchaser with a right to obtain
one or more "specified digital products" or products "transferred
electronically" to which the digital code relates. A "digital code" may be
obtained by any means, including email or by tangible means regardless of its
designation as "song code," "video code" or "book code."
See
32 V.S.A. §
9701(45) (definition of
"transferred electronically");
32 V.S.A. §
9701(46) (definition of
"specified digital products");
32 V.S.A. §
9701(47) (definition of "end
user"); Reg. §§ 1.9701(45); 1.9701(47).
