SALT Report 1478 – The Virginia Tax Commissioner ruled that a taxpayer’s sales of compressed air that he used to fill scuba diving tanks are sales of tangible personal property and subject to Virginia sales and use tax. Virginia Code § 58.1-602 defines tangible personal property as something that may be seen, weighed, measured, felt, touched or is perceptible to the senses.
The taxpayer contends that although he provides air that is filtered, compressed, and perceptible to the senses, he presumes that because he charges the same flat rate to fill tanks that may already contain air without consideration of the amount of air needed, he believes that he is not selling air but, instead he is selling a service. The Taxpayer provided rulings from other states to support his argument.
The Commissioner determined that by virtue of the process itself, the air used by the taxpayer was measured and perceptible to the senses. Therefore, the compressed air qualified as tangible personal property. The fact that the taxpayer charged the same rate to fill the tank regardless of the amount of air needed did not change the nature of the transaction. As the taxpayer stated, customers brought their tanks in to have them refilled with air making the true object of the transaction the attainment of compressed air. Therefore, the taxpayer’s sales of compressed air were subject to tax pursuant to Virginia Code §§ 58.1-602 and 58.1-603.
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