SALT Report 1514 – The Virginia Tax Commissioner determined that plastic and steel strapping materials used by a yarn manufacturer were not subject to Virginia retail sales tax because the manufacturer qualified for the resale exemption.
The Taxpayer used the strapping materials in two applications. First, the strapping was used to reinforce and strengthen the structural integrity of the corrugated boxes that were used to ship the yarn to the Taxpayer’s customers. Second, the Taxpayer used the strapping to bundle bales of waste yarn.
Virginia Code § 58.1-609.3 2 (iv) provides an exemption for “materials, containers, labels, sacks, cans, boxes, drums or bags for future use for packaging tangible personal property for shipment or sale.” The exemption is available only to industrial manufacturers or processors of products for sale or resale and applies whether the materials are returnable or nonreturnable.
Title 23 VAC 10-210-400 also addresses containers, packaging materials, and equipment and “transportation devices” which are defined as “items which are used to transport and protect products for sale and to restrain product movement in a single plane of direction. Examples of such items are pallets, dunnage, strapping and similar materials used to brace or secure cargo for transport.” This regulation goes on to provide that “transportation devices” are not considered packaging materials and may not be purchased tax exempt unless purchased for resale.
Based on the above regulations the Tax Commissioner determined that the taxpayer’s plastic and steel strapping was nonreturnable and as such, became the property of the Taxpayer’s customer. Furthermore, the taxpayer was a dealer registered to collect sales tax and was entitled to use of the resale exemption certificate, Form ST-10.
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