SB340: Retail Sales and Use Tax Act; conforms State to provisions of Streamlined Sales & Use Tax Agreement.

SENATE BILL NO. 340
Offered January 13, 2010
Prefiled January 12, 2010
A BILL to amend and reenact §§ 58.1-600, 58.1-601, 58.1-602, 58.1-603, 58.1-604, 58.1-605, 58.1-606, 58.1-609.3, 58.1-609.5, 58.1-609.10, 58.1-610, 58.1-611.1, 58.1-611.2, 58.1-611.3, 58.1-612, 58.1-613, 58.1-615, 58.1-618, 58.1-621, 58.1-622, 58.1-623, and 58.1-635 of the Code of Virginia; to amend the Code of Virginia by adding sections numbered 58.1-606.1, 58.1-606.2, 58.1-611.4, 58.1-612.1, 58.1-624.1, 58.1-625.2, 58.1-628.3, 58.1-635.1, 58.1-635.2, and 58.1-637.1 and by adding in Chapter 6 of Title 58.1 sections numbered 58.1-639.1 and 58.1-639.2; and to repeal §§ 58.1-604.6, 58.1-609.13, and 58.1-610.1 of the Code of Virginia, relating to the Virginia Retail Sales and Use Tax Act.
Patron-- Hanger

Referred to Committee on Finance

Be it enacted by the General Assembly of Virginia:

1.  That §§ 58.1-600, 58.1-601, 58.1-602, 58.1-603, 58.1-604, 58.1-605, 58.1-606, 58.1-609.3, 58.1-609.5, 58.1-609.10, 58.1-610, 58.1-611.1, 58.1-611.2, 58.1-611.3, 58.1-612, 58.1-613, 58.1-615, 58.1-618, 58.1-621, 58.1-622, 58.1-623, and 58.1-635 of the Code of Virginia are amended and reenacted and that the Code of Virginia is amended by adding sections numbered 58.1-606.1, 58.1-606.2, 58.1-611.4, 58.1-612.1, 58.1-624.1, 58.1-625.2, 58.1-628.3, 58.1-635.1, 58.1-635.2, and 58.1-637.1 and by adding in Chapter 6 of Title 58.1 sections numbered 58.1-639.1 and 58.1-639.2 as follows:

§ 58.1-600. Short title.

This chapter shall be known and may be cited as the "Virginia Retail Sales and Use Tax ActVirginia Streamlined Retail Sales and Use Tax Act."

§ 58.1-601. Administration of chapter.

A. The Tax Commissioner shall administer and enforce the assessment and collection of the taxes and penalties imposed by this chapter.

B. For purposes of evaluating the fiscal, economic and policy impact of sales and use tax exemptions, the Tax Commissioner may require from any person information relating to the evaluation of exempt purchases or sales, information relating to the qualification for exempt purchases, and information relating to direct or indirect government financial assistance which the person receives. Such information shall be filed on forms prescribed by the Tax Commissioner.

C. 1. The General Assembly has determined that it is in the best interest of the Commonwealth to simplify and modernize the retail sales and use tax administration in order to substantially reduce the burden of tax compliance. In furtherance of these goals, effective beginning on and after July 1, 2011, the Virginia Retail Sales and Use Tax Act shall be amended and renamed the Virginia Streamlined Retail Sales and Use Tax Act to conform to the requirements of the national Streamlined Sales and Use Tax Agreement.

2. The Tax Commissioner, one representative appointed by the Governor, and two representatives appointed by the General Assembly shall serve on the national Governing Board charged with administering the Streamlined Sales and Use Tax Agreement.

§ 58.1-602. Definitions.

As used in this chapter, unless the context clearly shows otherwise, the term or phrase:

"Advertising" means the planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting and other media, including, without limitation, the providing of concept, writing, graphic design, mechanical art, photography and production supervision. Any person providing advertising as defined herein shall be deemed to be the user or consumer of all tangible personal property purchased for use in such advertising.

?Agent? means a person appointed by the seller to represent the seller before the member states of the Streamlined Sales Tax Project.

?Agreement? means the Streamlined Sales and Use Tax Agreement, as adopted by multiple states on November 12, 2002, together with any amendments, that covers the administration of sales and use taxes.

?Alcoholic beverages? means beverages that are suitable for human consumption and contain one-half of one percent or more of alcohol by volume.

"Amplification, transmission and distribution equipment" means, but is not limited to, production, distribution, and other equipment used to provide Internet-access services, such as computer and communications equipment and software used for storing, processing and retrieving end-user subscribers' requests.

?Anonymous data? means information that does not identify a person.

?Bundled transaction? means the retail sale of two or more products, except real property and services to real property, where (i) the products are otherwise distinct and identifiable and (ii) the products are sold for one nonitemized price. A ?bundled transaction? shall 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.

"Business" includes any activity engaged in by any person, or caused to be engaged in by him, with the object of gain, benefit or advantage, either directly or indirectly.

?Certified Automated System? or ?CAS? means software certified under the Agreement to calculate the tax imposed by each jurisdiction on a transaction, determine the amount of tax to remit to the appropriate state, and maintain a record of the transaction.

?Certified Service Provider? or ?CSP? means an agent certified under the Agreement to perform all of the seller?s sales and use tax functions, other than the seller?s obligation to remit tax on its own purchases.

?Clothing? means all human wearing apparel suitable for general use. ?Clothing? shall include, but is not limited to, the following:

1. Aprons, household, and shop;

2. Athletic supporters;

3. Baby receiving blankets;

4. Bathing suits and caps;

5. Beach capes and coats;

6. Belts and suspenders;

7. Boots;

8. Coats and jackets;

9. Costumes;

10. Diapers, children and adult, including disposable diapers;

11. Ear muffs;

12. Footlets;

13. Formal wear;

14. Garters and garter belts;

15. Girdles;

16. Gloves and mittens for general use;

17. Hats and caps;

18. Hosiery;

19. Insoles for shoes;

20. Lab coats;

21. Neckties;

22. Overshoes;

23. Pantyhose;

24. Rainwear;

25. Rubber pants;

26. Sandals;

27. Scarves;

28. Shoes and shoe laces;

29. Slippers;

30. Sneakers;

31. Socks and stockings;

32. Steel toed shoes;

33. Underwear;

34. Uniforms, athletic and nonathletic; and

35. Wedding apparel.

?Clothing" shall not include:

1. Belt buckles sold separately;

2. Costume masks sold separately;

3. Patches and emblems sold separately;

4. Sewing equipment and supplies, including, but not limited to, knitting needles, patterns, pins, scissors, sewing machines, sewing needles, tape measures, and thimbles; and

5. Sewing materials that become part of ?clothing? including, but not limited to, buttons, fabric, lace, thread, yarn, and zippers.

?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.

?Computer software? means a set of coded instructions designed to cause a computer or automatic data processing equipment to perform a task.

?Confidential taxpayer information? means all information that is protected under the Commonwealth?s laws, regulations, and privileges.

"Cost price" means the actual cost of an item or article of tangible personal property computed in the same manner as the sales price as defined in this section without any deductions therefrom on account of the cost of materials used, labor, or service costs, transportation charges, or any expenses whatsoever.

"Custom program" means a computer program which is specifically designed and developed only for one customer. The combining of two or more prewritten programs does not constitute a custom computer program. A prewritten program that is modified to any degree remains a prewritten program and does not become custom.

?Delivered electronically? means delivered to the purchaser by means other than tangible storage media.

?Delivery charges? or ?transportation 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. ?Delivery charges? does not include charges for handling.

?Dietary supplement? means any product, other than tobacco, intended to supplement the diet that:

1. Contains one or more of the following dietary ingredients:

a. A vitamin;

b. A mineral;

c. An herb or other botanical;

d. An amino acid;

e. A dietary substance for use by humans to supplement the diet by increasing the total dietary intake; or

f. A concentrate, metabolite, constituent, extract, or combination of any ingredient described above; and

2. Is intended for ingestion in tablet, capsule, powder, soft gel, gelcap, or liquid form, or if not intended for ingestion in such a form, is not represented as conventional food and is not represented for use as a sole item of a meal or of the diet; and

3. Is required to be labeled as a dietary supplement, identifiable by the ?Supplemental Facts? box found on the label and as required pursuant to 21 C.F.R. § 101.36.

?Direct mail? means printed material delivered or distributed by the United States mail or other delivery service to a mass audience or to an addresses on a mailing list provided by the purchaser or at the direction of the purchaser when the cost of the items are not billed directly to the recipients. ?Direct mail? includes tangible personal property supplied directly or indirectly by the purchaser to the direct mail seller for inclusion in the package containing the printed material. ?Direct mail? does not include multiple items of printed material delivered to a single address.

?Direct mail form? means a form provided by the Virginia Department of Taxation that records all the jurisdictions to which direct mail is delivered to recipients, and that, upon receipt by a purchaser, relieves the seller of all obligations to collect, pay, or remit the applicable tax on a direct pay basis.

"Distribution" means the transfer or delivery of tangible personal property for use, consumption, or storage by the distributee, and the use, consumption, or storage of tangible personal property by a person who has processed, manufactured, refined, or converted such property, but does not include the transfer or delivery of tangible personal property for resale or any use, consumption, or storage otherwise exempt under this chapter.

?Drug? means a compound, substance, or preparation, and any component of a compound, substance, or preparation, other than food and food ingredients, dietary supplements, or alcoholic beverages:

1. Recognized in the official United States Pharmacopoeia, official Homeopathic Pharmacopoeia of the United States, or official National Formulary, and supplement to any of them; or

2. Intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease; or

3. Intended to affect the structure or any function of the body.

?Durable medical equipment? means equipment including repair and replacement parts for same, but does not include mobility-enhancing equipment, which:

1. Can withstand repeated use;

2. Is primarily and customarily used to serve a medical purpose;

3. Generally is not useful to a person in the absence of illness or injury;

4. Is not worn in or on the body; and

5. Is appropriate for use in the home.

?Electronic? means relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.

?Food and food ingredients? means substances, whether in liquid, concentrated, solid or 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 ingredients? does not include alcoholic beverages, tobacco, or food sold by a seller whose proper primary North American Industry Classification System (NAICS) classification is manufacturing in sector 311.

?Food sold through vending machines? means food dispensed from a machine or other mechanical device that accepts payment.

?Grooming and hygiene products? means soaps and cleaning solutions, shampoo, toothpaste, mouthwash, antiperspirants, and suntan lotions and screens, regardless of whether the items meet the definition of over-the-counter drugs.

"Gross proceeds" means the charges made or voluntary contributions received for the lease or rental of tangible personal property or for furnishing services, computed with the same deductions, where applicable, as for sales price as defined in this section over the term of the lease, rental, service, or use, but not less frequently than monthly.

"Gross sales" means the sum total of all retail sales of tangible personal property or services as defined in this chapter, without any deduction, except as provided in this chapter. "Gross sales" shall not include the federal retailers' excise tax or the federal diesel fuel excise tax imposed in § 4091 of the Internal Revenue Code if the excise tax is billed to the purchaser separately from the selling price of the article, or the Virginia retail sales or use tax, or any sales or use tax imposed by any county or city under § 58.1-605 or 58.1-606.

"Import" and "imported" are words applicable to tangible personal property imported into the Commonwealth from other states as well as from foreign countries, and "export" and "exported" are words applicable to tangible personal property exported from the Commonwealth to other states as well as to foreign countries.

"In this Commonwealth" or "in the Commonwealth" means within the limits of the Commonwealth of Virginia and includes all territory within these limits owned by or ceded to the United States of America.

"Integrated process," when used in relation to semiconductor manufacturing, means a process that begins with the research or development of semiconductor products, equipment, or processes, includes the handling and storage of raw materials at a plant site, and continues to the point that the product is packaged for final sale and either shipped or conveyed to a warehouse. Without limiting the foregoing, any semiconductor equipment, fuel, power, energy, supplies, or other tangible personal property shall be deemed used as part of the integrated process if its use contributes, before, during, or after production, to higher product quality, production yields, or process efficiencies. Except as otherwise provided by law, such term shall not mean general maintenance or administration.

"Internet" means collectively, the myriad of computer and telecommunications facilities, which comprise the interconnected world-wide network of computer networks.

"Internet service" means a service that enables users to access proprietary and other content, information electronic mail, and the Internet as part of a package of services sold to end-user subscribers.

?Layaway? means a transaction in which merchandise is set aside for future delivery to a customer who makes a deposit, agrees to pay the balance of the purchase price over a period of time, and at the end of the payment period, receives the merchandise. An order is accepted for layaway by the seller when the seller removes the property from normal inventory or clearly identifies the property as sold to the purchaser.

"Lease or rental" means the leasing or renting of tangible personal property and the possession or use thereof by the lessee or renter for a consideration, without transfer of the title to such property 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.

1. Lease or rental does not include:

a. 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;

b. 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 not exceeding the greater of $100 or one percent of the total required payments; or

c. 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 subdivision, an operator must do more than maintain, inspect, or set up the tangible personal property.

2. Lease or rental does include agreements covering motor vehicles and trailers where the amount of consideration may be increased or decreased by reference to the amount realized upon sale or disposition of the property as defined in 26 USC § 7701(h)(1), as amended or renumbered, or successor provisions.

3. This definition shall be used for sales and use tax purposes regardless if a transaction is characterized as a lease or rental under generally accepted accounting principles, the Internal Revenue Code, or other provisions of federal, state, or local law.

4. This definition shall be applied only prospectively from the effective date of this statute, and shall have no retroactive impact on existing leases or rentals.

?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.

"Manufacturing, processing, refining, or conversion" includes the production line of the plant starting with the handling and storage of raw materials at the plant site and continuing through the last step of production where the product is finished or completed for sale and conveyed to a warehouse at the production site, and also includes equipment and supplies used for production line testing and quality control. The term "manufacturing" shall also include the necessary ancillary activities of newspaper and magazine printing when such activities are performed by the publisher of any newspaper or magazine for sale daily or regularly at average intervals not exceeding three months.

The determination whether any manufacturing, mining, processing, refining or conversion activity is industrial in nature shall be made without regard to plant size, existence or size of finished product inventory, degree of mechanization, amount of capital investment, number of employees or other factors relating principally to the size of the business. Further, "industrial in nature" shall include, but not be limited to, those businesses classified in codes 10 through 14 and 20 through 39 published in the Standard Industrial Classification Manual for 1972 and any supplements issued thereafter.

?Mobility enhancing equipment? means equipment including repair and replacement parts to same, but does not include durable medical equipment, which:

1. 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;

2. Is not generally used by persons with normal mobility; and

3. Does not include any motor vehicle or equipment on a motor vehicle normally provided by a motor vehicle manufacturer.

?Model 1 seller? means a seller that has selected a CSP as its agent to perform all the seller?s sales and use tax functions, other than the seller?s obligation to remit tax on its own purchases.

?Model 2 seller? means a seller that has selected a CAS to perform part of its sales and use tax functions, but retains responsibility for remitting the tax.

?Model 3 seller? means a seller that has sales in at least five member states, has total annual sales revenue of at least $500 million, has a proprietary system that calculates the amount of tax due each jurisdiction, and has entered into a performance agreement with the member states that establishes a tax performance standard for the seller. As used in this definition, a seller includes an affiliated group of sellers using the same proprietary system.

"Modular building" means, but shall not be limited to, single and multifamily houses, apartment units, commercial buildings, and permanent additions thereof, comprised of one or more sections that are intended to become real property, primarily constructed at a location other than the permanent site, built to comply with the Virginia Industrialized Building Safety Law (§ 36-70 et seq.) as regulated by the Virginia Department of Housing and Community Development, and shipped with most permanent components in place to the site of final assembly. For purposes of this chapter, a modular building shall not include a mobile office as defined in § 58.1-2401 or any manufactured building subject to and certified under the provisions of the National Manufactured Housing Construction and Safety Standards Act of 1974 (42 U.S.C. § 5401 et seq.).

"Modular building manufacturer" means a person or corporation who owns or operates a manufacturing facility and is engaged in the fabrication, construction and assembling of building supplies and materials into modular buildings, as defined in this section, at a location other than at the site where the modular building will be assembled on the permanent foundation and may or may not be engaged in the process of affixing the modules to the foundation at the permanent site.

"Modular building retailer" means any person who purchases or acquires a modular building from a modular building manufacturer, or from another person, for subsequent sale to a customer residing within or outside of the Commonwealth, with or without installation of the modular building to the foundation at the permanent site.

"Motor vehicle" means a "motor vehicle" as defined in § 58.1-2401, taxable under the provisions of the Virginia Motor Vehicles Sales and Use Tax Act (§ 58.1-2400 et seq.) and upon the sale of which all applicable motor vehicle sales and use taxes have been paid.

"Occasional sale" means a sale of tangible personal property not held or used by a seller in the course of an activity for which he is required to hold a certificate of registration, including the sale or exchange of all or substantially all the assets of any business and the reorganization or liquidation of any business, provided such sale or exchange is not one of a series of sales and exchanges sufficient in number, scope and character to constitute an activity requiring the holding of a certificate of registration.

"Open video system" means an open video system authorized pursuant to 47 U.S.C. § 573 and, for purposes of this chapter only, shall also include Internet service regardless of whether the provider of such service is also a telephone common carrier.

?Over-the-counter drug? means a drug that contains a label that identifies the product as a drug as required by 21 C.F.R. § 201.66. The over-the-counter drug label includes:

1. A ?Drug Facts? panel; or

2. A statement of the ?active ingredient(s)? with a list of those ingredients contained in the compound, substance, or preparation.

"Person" includes any individual, firm, copartnership, cooperative, nonprofit membership corporation, joint venture, association, corporation, estate, trust, business trust, trustee in bankruptcy, receiver, auctioneer, syndicate, assignee, club, society, or other group or combination acting as a unit, body politic or political subdivision, whether public or private, or quasi-public, and the plural of such term shall mean the same as the singular.

?Personally identifiable information? means information that identifies a person.

?Prepared food? means:

1. Food sold in a heated state or heated by the seller;

2. Two or more food ingredients mixed or combined by the seller for sale as a single item; or

3. Food sold with eating utensils provided by the seller, including plates, knives, forks, spoons, glasses, cups, napkins, or straws. A plate does not include a container or packaging used to transport the food.

For purposes of subdivision 2 of this definition, ?prepared food? does not include food that is only cut, repackaged, or pasteurized by the seller, and eggs, fish, meat, poultry, and foods containing these raw animal foods requiring cooking by the consumer, as recommended by the Food and Drug Administration in Chapter 3, part 401.11 of its Food Code so as to prevent food-borne illnesses.

?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 member state.

?Prewritten computer software? means computer software, including prewritten upgrades, that 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.?

"Prewritten program" means a computer program that is prepared, held or existing for general or repeated sale or lease, including a computer program developed for in-house use and subsequently sold or leased to unrelated third parties.

?Prosthetic device? means a replacement, corrective, or supportive device including repair and replacement parts for same, worn on or in the body to:

1. Artificially replace a missing portion of the body;

2. Prevent or correct physical deformity or malfunction; or

3. Support a weak or deformed portion of the body.

?Purchase price? applies to the measure subject to use tax and has the same meaning as sales price.

"Railroad rolling stock" means locomotives, of whatever motive power, autocars, railroad cars of every kind and description, and all other equipment determined by the Tax Commissioner to constitute railroad rolling stock.

"Retail sale" or a "sale at retail" means a sale to any person for any purpose other than for resale in the form of tangible personal property or services taxable under this chapter, and shall include any such transaction as the Tax Commissioner upon investigation finds to be in lieu of a sale. All sales for resale must be made in strict compliance with regulations applicable to this chapter. Any dealer making a sale for resale which is not in strict compliance with such regulations shall be personally liable for payment of the tax any sale, lease, or rental for any purpose other than for resale, sublease, or subrent.

The terms "retail sale" and a "sale at retail" shall specifically include the following: (i) the sale or charges for any room or rooms, lodgings, or accommodations furnished to transients for less than 90 continuous days by any hotel, motel, inn, tourist camp, tourist cabin, camping grounds, club, or any other place in which rooms, lodging, space, or accommodations are regularly furnished to transients for a consideration; (ii) sales of tangible personal property to persons for resale when because of the operation of the business, or its very nature, or the lack of a place of business in which to display a certificate of registration, or the lack of a place of business in which to keep records, or the lack of adequate records, or because such persons are minors or transients, or because such persons are engaged in essentially service businesses, or for any other reason there is likelihood that the Commonwealth will lose tax funds due to the difficulty of policing such business operations; and (iii) the separately stated charge made for automotive refinish repair materials that are permanently applied to or affixed to a motor vehicle during its repair. The Tax Commissioner is authorized to promulgate regulations requiring vendors of or sellers to such persons to collect the tax imposed by this chapter on the cost price of such tangible personal property to such persons and may refuse to issue certificates of registration to such persons.

The term "transient" shall not include a purchaser of camping memberships, time-shares, condominiums, or other similar contracts or interests that permit the use of, or constitute an interest in, real estate, however created or sold and whether registered with the Commonwealth or not. Further, a purchaser of a right or license which entitles the purchaser to use the amenities and facilities of a specific real estate project on an ongoing basis throughout its term shall not be deemed a transient; provided, however, that the term or time period involved is for seven years or more.

The terms "retail sale" and "sale at retail" shall not include a transfer of title to tangible personal property after its use as tools, tooling, machinery or equipment, including dies, molds, and patterns, if (i) at the time of purchase, the purchaser is obligated, under the terms of a written contract, to make the transfer and (ii) the transfer is made for the same or a greater consideration to the person for whom the purchaser manufactures goods.

"Retailer" means every person engaged in the business of making sales at retail, or for distribution, use, consumption, or storage to be used or consumed in the Commonwealth.

"Sale" means any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property and any rendition of a taxable service for a consideration, and includes the fabrication of tangible personal property for consumers who furnish, either directly or indirectly, the materials used in fabrication, and the furnishing, preparing, or serving for a consideration of any tangible personal property consumed on the premises of the person furnishing, preparing, or serving such tangible personal property. A transaction whereby the possession of property is transferred but the seller retains title as security for the payment of the price shall be deemed a sale.

"Sales price" means the total amount for which tangible personal property or services are sold, including any services that are a part of the sale, valued in money, whether paid in money or otherwise, and includes any amount for which credit is given to the purchaser, consumer, or lessee by the dealer, without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any other expenses whatsoever. "Sales price" shall not include (i) any cash discount allowed and taken; (ii) finance charges, carrying charges, service charges or interest from credit extended on sales of tangible personal property under conditional sale contracts or other conditional contracts providing for deferred payments of the purchase price; (iii) separately stated local property taxes collected; (iv) that portion of the amount paid by the purchaser as a discretionary gratuity added to the price of a meal; or (v) that portion of the amount paid by the purchaser as a mandatory gratuity or service charge added by a restaurant to the price of a meal, but only to the extent that such mandatory gratuity or service charge does not exceed 20% of the price of the meal. Where used articles are taken in trade, or in a series of trades as a credit or part payment on the sale of new or used articles, the tax levied by this chapter shall be paid on the net difference between the sales price of the new or used articles and the credit for the used articles.

?Sales price? applies to the measure subject to sales tax and means the total amount of consideration, including cash, credit, property, and services, for which personal property or services are sold, leased or rented, valued in money, whether received in money or otherwise, without any deduction for the following:

1. The seller?s cost of the property sold;

2. The cost of materials used, labor or service cost, interest, losses, all costs of transportation to the seller, all taxes imposed on the seller, and any other expense of the seller;

3. Separately stated delivery charges; or

4. Separately stated installation charges.

?Sales price? shall not include:

1. Discounts, including cash, term, or coupons that are not reimbursed by a third party that are allowed by a seller and taken by a purchaser on a sale;

2. Interest, financing, and carrying charges from credit extended on the sale of personal property or services, if the amount is separately stated on the invoice, bill of sale or similar document given to the purchaser;

3. Any taxes legally imposed directly on the consumer that are separately stated on the invoice, bill of sale or similar document given to the purchaser;

4. Charges by the seller for any services necessary to complete the sale, other than delivery and installation charges;

5. That portion of the amount paid by the purchaser as a discretionary gratuity added to the price of a meal;

6. That portion of the amount paid by the purchaser as a mandatory gratuity or service charge, separately stated on the invoice or billing document by a restaurant, but only to the extent that such mandatory gratuity or service charge does not exceed 20 percent of the price of the meal; and

7. Credit for any trade-in, as determined by state law.

?Sales price? shall include consideration received by the seller from third parties if:

1. The seller actually receives consideration from a party other than the purchaser and the consideration is directly related to a price reduction or discount on the sale;

2. The seller has an obligation to pass the price reduction or discount through to the purchaser;

3. The amount of the consideration attributable to the sale is fixed and determinable by the seller at the time of the sale of the item to the purchaser; and

4. One of the following criteria is met:

a. The purchaser presents a coupon, certificate or other documentation to the seller to claim a price reduction or discount where the coupon, certificate or documentation is authorized, distributed or granted by a third party with the understanding that the third party will reimburse any seller to whom the coupon, certificate or documentation is presented;

b. The purchaser identifies himself or herself to the seller as a member of a group or organization entitled to a price reduction or discount (?preferred customer? card that is available to any patron does not constitute membership in such a group); or

c. The price reduction or discount is identified as a third party price reduction or discount on the invoice received by the purchaser.

?School art supply? means an item commonly used by a student in a course of study for artwork. The following is an all-inclusive list:

1. Clay and glazes;

2. Paints, acrylic, tempera, and oil;

3. Paintbrushes for artwork;

4. Sketch and drawing pads; and

5. Watercolors.

"School computer supply" means an item commonly used by a student in a course of study in which a computer is used.  The following is an all-inclusive list:

1.  Computer storage media; diskettes, compact disks;

2.  Handheld electronic schedulers except devices that are cellular phones;

3.  Personal digital assistants except devices that are cellular phones

4.  Computer printers; and

5.  Printer supplies for computers, printer paper and printer ink.

?School instructional material? means written material commonly used by a student in a course of study as a reference and to learn the subject being taught. The following is an all-inclusive list:

1. Reference books, including dictionaries and thesauruses;

2. Reference maps and globes;

3. Textbooks; and

4. Workbooks.

?School music supply? means an item commonly used by a student in a course related to the study of music. 

"School supply? means an item commonly used by a student in a course of study.  The term is mutually exclusive of the terms ?school art supply,? ?school instructional material,? ?school music supply,? and ?school computer supply.?  The following is an all-inclusive list:

1.  Binders;

2.  Book bags;

3.  Calculators;

4.  Cellophane tape;

5.  Blackboard chalk;

6.  Compasses;

7.  Composition books;

8.  Crayons;

9.  Erasers;

10.  Folders; expandable, pocket, plastic, and manila;

11.  Glue, paste, and paste sticks;

12.  Highlighters;

13.  Index cards;

14.  Index card boxes;

15.  Legal pads;

16.  Lunch boxes;

17.  Markers;

18.  Notebooks;

19.  Paper; loose leaf ruled notebook paper, copy paper, graph paper, tracing paper, manila paper, colored paper, poster board and construction paper;

20.  Pencil boxes and other supply boxes;

21.  Pencil sharpeners;

22.  Pencils;

23.  Pens;

24.  Protractors;

25.  Rulers;

26.  Scissors; and

27.  Writing tablets.

"Semiconductor cleanrooms" means the integrated systems, fixtures, piping, partitions, flooring, lighting, equipment, and all other property used to reduce contamination or to control airflow, temperature, humidity, vibration, or other environmental conditions required for the integrated process of semiconductor manufacturing.

"Semiconductor equipment" means (i) machinery or tools or repair parts or replacements thereof; (ii) the related accessories, components, pedestals, bases, or foundations used in connection with the operation of the equipment, without regard to the proximity to the equipment, the method of attachment, or whether the equipment or accessories are affixed to the realty; (iii) semiconductor wafers and other property or supplies used to install, test, calibrate or recalibrate, characterize, condition, measure, or maintain the equipment and settings thereof; and (iv) equipment and supplies used for quality control testing of product, materials, equipment, or processes; or the measurement of equipment performance or production parameters regardless of where or when the quality control, testing, or measuring activity takes place, how the activity affects the operation of equipment, or whether the equipment and supplies come into contact with the product.

"Storage" means any keeping or retention of tangible personal property for use, consumption or distribution in the Commonwealth, or for any purpose other than sale at retail in the regular course of business.

"Tangible personal property" means personal property which may be seen, weighed, measured, felt, or touched, or is in any other manner perceptible to the senses. The term "tangible personal property" shall not include stocks, bonds, notes, insurance or other obligations or securities. The term "tangible personal property" shall include (i) telephone calling cards upon their initial sale, which shall be exempt from all other state and local utility taxes, electricity, water, gas, and steam; (ii) prewritten computer software; and (ii) (iii) manufactured signs.

?Telephone calling card? means a card, similar in appearance to a credit card, the purchase of which gives the holder access to communication services and 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 that decrease in number with use.

?Tobacco? means cigarettes, cigars, chewing or pipe tobacco, or any other item that contains tobacco. This definition shall only apply to the provisions of this chapter.

?Transient? means any person who rents, leases, or otherwise occupies transient accommodations for less than 90 continuous days. The term ?transient? shall not include a purchaser of camping memberships, time shares, condominiums, or other similar contracts or interests that permit the use of, or constitute an interest in real estate, however created or sold and whether registered with the Commonwealth or not. Further, a purchaser of a right or license which entitles the purchaser to use the amenities and facilities of a specific real estate project on an ongoing basis throughout its term shall not be deemed a ?transient,? provided that the term or time period involved is for seven years or more.

?Transient accommodations? means any room or rooms, lodgings, or other accommodations furnished for less than 90 continuous days by any hotel, motel, inn, tourist camp, tourist cabin, camping grounds, club, or any other place in which rooms, lodging, space or accommodations are regularly furnished for a consideration.

?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 that are operated by air carriers authorized and certificated by the U.S. Department of Transportation or another federal or a foreign authority to engage in the carriage of persons or property in interstate or foreign commerce; and

4. Containers designed for use on and component parts attached or secured on the items set forth in this definition.

"Use" means the exercise of any right or power over tangible personal property incident to the ownership thereof, except that it does not include the sale at retail of that property in the regular course of business. The term does not include the exercise of any right or power, including use, distribution, or storage, over any tangible personal property sold to a nonresident donor for delivery outside of the Commonwealth to a nonresident recipient pursuant to an order placed by the donor from outside the Commonwealth via mail or telephone. The term does not include any sale determined to be a gift transaction, subject to tax under § 58.1-604.6.

"Use tax" refers to the tax imposed upon the use, consumption, distribution, and storage as herein defined.

"Used directly," when used in relation to manufacturing, processing, refining, or conversion, refers to those activities which are an integral part of the production of a product, including all steps of an integrated manufacturing or mining process, but not including ancillary activities such as general maintenance or administration. When used in relation to mining, it shall refer to the activities specified above, and in addition, any reclamation activity of the land previously mined by the mining company required by state or federal law.

"Video programmer" means a person or entity that provides video programming to end-user subscribers.

"Video programming" means video and/or information programming provided by or generally considered comparable to programming provided by a cable operator including, but not limited to, Internet service.

§ 58.1-603. Imposition of sales tax.

A. There is hereby levied and imposed, in addition to all other taxes and fees of every kind now imposed by law, a license or privilege tax upon every person who engages in the business of selling at retail or distributing tangible personal property in this the Commonwealth, or who rents or furnishes any of the things or services taxable under this chapter, or who stores for use or consumption in this the Commonwealth any item or article of tangible personal property as defined in this chapter, or who leases or rents such property within this the Commonwealth, in the amount of three and one-half percent through midnight on July 31, 2004, and four percent beginning on and after August 1, 2004:

1. Of the gross sales price of each item or article of tangible personal property when sold at retail or distributed in this the Commonwealth.

2. Of the gross sales price on the initial sale of every telephone calling card, which shall be exempt from all other state and local utility taxes.

3. Of the gross sales price of each item of prepared food, as defined in § 58.1-602.

4. Of the gross sales price of any food sold by any retail establishment where the gross receipts derived from the sale of food prepared by such retail establishment for immediate consumption on or off the premises of the retail establishment constitutes more than 80 percent of the total gross receipts of that retail establishment, including but not limited to motor fuel purchases, regardless of whether such prepared food is consumed on the premises of that retail establishment. For purposes of this section, ?retail establishment? means each place of business for which any ?dealer,? as defined in § 58.1-612, is required to apply for and receive a certificate of registration pursuant to § 58.1-613.

5. Of the gross sales price of automotive refinish repair materials that are permanently applied to or affixed to a motor vehicle during its repair, provided the charges for these materials are separately stated on the sales invoice.

26. Of the gross proceeds derived from the lease or rental of tangible personal property, where the lease or rental of such property is an established business, or part of an established business, or the same is incidental or germane to such business.

37. Of the cost price of each item or article of tangible personal property stored in this the Commonwealth for use or consumption in this the Commonwealth.

48. Of the gross proceeds derived from the sale or charges for rooms, lodgings or accommodations furnished to transients as set out in the definition of "retail sale" in § 58.1-602.

59. Of the gross sales of any services which are expressly stated as taxable within this chapter.

B. The tax levied under this section shall apply to persons who make sales of tangible personal property to persons for resale when, because of the operation of the business, or its very nature, or the lack of a place of business in which to display a certificate of registration, or the lack of a place of business in which to keep records, or the lack of adequate records, or because such persons are minors or transients, or because such persons are engaged in essentially service businesses, or for any other reason, there is likelihood that the Commonwealth will lose tax funds due to the difficulty of policing such business operations. The tax levied under this chapter shall also apply to any other transaction that the Tax Commissioner, upon investigation, finds to be in lieu of a sale of tangible personal property. The Tax Commissioner is authorized to promulgate regulations requiring vendors of or sellers to such persons to collect the tax imposed by this chapter on the purchase price of such tangible personal property to such persons and may refuse to issue certificates of registration to such persons.

C. Any changes in the rate of tax levied under this chapter or the items on which this tax is levied shall not become effective until the first day of a calendar quarter following such rate change.

§ 58.1-604. Imposition of use tax.

A. There is hereby levied and imposed, in addition to all other taxes and fees now imposed by law, a tax upon the use or consumption of tangible personal property in this the Commonwealth, or the storage of such property outside the Commonwealth for use or consumption in this the Commonwealth, in the amount of three and one-half percent through midnight on July 31, 2004, and four percent beginning on and after August 1, 2004:

1. Of the cost purchase price of each item or article of tangible personal property used or consumed in this the Commonwealth. Tangible personal property which has been acquired for use outside this the Commonwealth and subsequently becomes subject to the tax imposed hereunder shall be taxed on the basis of its cost purchase price if such property is brought within this the Commonwealth for use within six months of its acquisition; but if so brought within this the Commonwealth six months or more after its acquisition, such property shall be taxed on the basis of the current market value (but not in excess of its cost purchase price) of such property at the time of its first use within this the Commonwealth. Such tax shall be based on such proportion of the cost purchase price or current market value as the duration of time of use within this the Commonwealth bears to the total useful life of such property (but it shall be presumed in all cases that such property will remain within this the Commonwealth for the remainder of its useful life unless convincing evidence is provided to the contrary).

2. Of the cost purchase price of each item or article of tangible personal property stored outside this the Commonwealth for use or consumption in this the Commonwealth.

3. A transaction taxed under § 58.1-603 shall not also be taxed under this section, nor shall the same transaction be taxed more than once under either section.

4. The use tax shall not apply with respect to the use of any article of tangible personal property brought into this the Commonwealth by a nonresident individual, visiting in Virginia, for his personal use, while within this the Commonwealth.

5. The use tax shall not apply to out-of-state mail order catalog purchases totaling $100 or less during any calendar year.

B. Any changes in the rate of tax levied under this chapter shall not become effective until the first day of a calendar quarter following such rate change.

§ 58.1-605. To what extent and under what conditions cities and counties may levy local sales taxes; collection thereof by Commonwealth and return of revenue to each city or county entitled thereto.

A. No county, city or town shall impose any local general sales or use tax or any local general retail sales or use tax except as authorized by this section.

B. The council of any city and the governing body of any county may levy a general retail sales tax at the rate of one percent to provide revenue for the general fund of such city or county. Such tax shall be added to the rate of the state sales tax imposed by §§ 58.1-603 and 58.1-604 and shall be subject to all the provisions of this chapter and the rules and regulations published with respect thereto. No discount under § 58.1-622 shall be allowed on a local sales tax.

C. The council of any city and the governing body of any county desiring to impose a local sales tax under this section may do so by the adoption of an ordinance stating its purpose and referring to this section, and providing that such ordinance shall be effective on the first day of a month at least 60 days after its adoption calendar quarter after a minimum of at least 60 days? notice to sellers. A certified copy of such ordinance shall be forwarded to the Tax Commissioner so that it will be received within five days after its adoption.

D. Any local sales tax levied under this section shall be administered and collected by the Tax Commissioner in the same manner and subject to the same penalties as provided for the state sales tax.

E. Any changes in the local sales tax boundaries shall be effective only on the first day of a calendar quarter after a minimum of at least 60 days? notice to sellers.

F. All local sales tax moneys collected by the Tax Commissioner under this section shall be paid into the state treasury to the credit of a special fund which is hereby created on the Comptroller's books under the name "Collections of Local Sales Taxes.&q