Did Virginia sales tax apply to Bloomingdale's orders delivered outside Virginia when title and risk of loss stayed with the seller until delivery?

Subject

BLOOMINGDALE'S, INC., v VIRGINIA DEPARTMENT OF TAXATION

Plain-English summary

The Richmond Circuit Court declared Virginia's 1998-2001 assessment erroneous for Bloomingdale's transactions in which goods never entered Virginia or were delivered outside Virginia while title or possession did not pass in Virginia.

The order identified five sample transactions involving delivery to the District of Columbia, New York, North Carolina, Florida, and Massachusetts. Payment methods and purchaser connections to Virginia varied, but Bloomingdale's retained risk of loss until out-of-state delivery and no title or possession passed in Virginia.

The court held those transactions outside Va. Code § 58.1-603 and within the out-of-state-delivery exemption. It ordered the assessment corrected so no Virginia sales or use tax was due for goods that never entered Virginia or were delivered to out-of-state recipients under the stated terms.

The order says its reasons were stated in a July 12, 2007 letter opinion, but that opinion is not included in this official source. The page also does not state later appellate history.

What this means for you

• Contract terms governing title and risk of loss can be central to interstate sale sourcing.
• In-state payment or a Virginia purchaser connection did not control these sample transactions.
• Preserve warehouse origin, ship-to destination, carrier, title, risk-of-loss, and other-state tax records.
• Check later authority before treating this 2007 trial-court order as the final current rule.

Common questions

Did the goods have to originate outside Virginia? No. Some sample goods shipped from Virginia, but delivery and risk-of-loss terms still led to out-of-state treatment.

Did Virginia payment make the sale taxable? Not in the transactions described by the order.

Does this page reproduce the court's full reasoning? No. It includes the order but not the referenced letter opinion.

Citations and references

• Va. Code § 58.1-603 and § 58.1-609.10(4).
• Bloomingdale's, Inc. v. Virginia Department of Taxation, At Law No. CL05T00891-00-1/07-3860 (Richmond Cir. Ct. Aug. 7, 2007).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 07-134

Original ruling text

VIRGINIA:

IN THE CIRCUIT COURT FOR THE CITY OF RICHMOND

John Marshall Courts Building

BLOOMINGDALE'S, INC., )

)

Applicant, )

)

v. ) At Law No. CL05T00891-00-1/07-3860

)

VIRGINIA DEPARTMENT OF TAXATION, )

an agency of the Commonwealth of Virginia , )

)

Defendant. )

ORDER

This matter came to be tried before this Court on July 11, 2006. Upon consideration of the witness testimony, exhibits, argument of counsel and briefs filed, for the reasons stated in the Court's letter opinion of July 12, 2007, it is hereby ORDERED as follows:

1. Defendant Virginia Department of Taxation's Assessment against Applicant Bloomingdale's, Inc. for the period January 1, 1998 through December 31, 2001 is hereby declared erroneous because it is based on collecting sales tax on interstate commerce transactions not occurring in Virginia in which the merchandise either (i) never entered Virginia or (ii) was delivered outside of Virginia, with risk of loss passing outside Virginia, for use or consumption outside of Virginia; and

2. Specifically, the following sample transactions reflected as Plaintiff's Exhibit 1 and Plaintiff's Exhibit 5 were not subject to Virginia sales tax, for the following reasons:

Transaction #43 The merchandise in this transaction was delivered to a recipient in the District of Columbia, with sales/use tax remitted by Bloomingdale's, Inc. to the District of Columbia. Payment for the goods was made in cash in Virginia, but the goods were shipped directly from a warehouse outside Virginia to a recipient outside Virginia. Risk of loss remained with Bloomingdale's, Inc. until delivery in the District of Columbia. There was no transfer of title or possession in the Commonwealth of Virginia. The transaction is not taxable under Virginia Code § 58.1-603, and is exempt under Virginia Code § 58.1-609.10(4).

Transaction #45: The merchandise in this transaction was delivered to a recipient in New York, with sales/use tax remitted by Bloomingdale's, Inc. to New York. The goods were paid for by credit card by a person who was not at the point of sale at the time of payment but who had a Virginia telephone number. The goods were shipped from Virginia and delivered to a recipient outside Virginia. Risk of loss remained with Bloomingdale's, Inc. until delivery in New York. There was no transfer of title or possession in the Commonwealth of Virginia. The transaction is not taxable under Virginia Code § 58.1­-603, and is exempt under Virginia Code § 58.1-609.10(4).

Transaction #58: The merchandise in this transaction was delivered to a recipient in North Carolina. No sales/use tax was collected or remitted by Bloomingdale's, Inc. which is not registered to collect sales/use taxes in that state. The goods were paid for by credit card by a Virginia business which was not represented at the point of sale at the time of payment but which had a Virginia telephone number. The goods were shipped from Virginia and delivered outside Virginia. Risk of loss remained with Bloomingdale's, Inc. until delivery in North Carolina. There was no transfer of title or possession in the Commonwealth of Virginia. The transaction is not taxable under Virginia Code § 58.1-603, and is exempt under Virginia Code § 58.1-609.10(4).

Transaction #59: The merchandise in this transaction was delivered to a recipient in Florida, with Florida sales/use tax remitted by Bloomingdale's, Inc. to Florida. The goods were paid for by credit card by a person who was not at the point of sale at the time of payment but who had a Virginia telephone number. The customer paid for the goods in Virginia, and the goods were shipped from Virginia and delivered to a recipient outside Virginia. Risk of loss remained with Bloomingdale's, Inc. until delivery in Florida. There was no transfer of title or possession in the Commonwealth of Virginia. The transaction is not taxable under Virginia Code § 58.1-603, and is exempt under Virginia Code § 58.1.-609,10(4).

Transaction #60: The merchandise in this transaction was delivered to a recipient in Massachusetts, with sales/use tax remitted by Bloomingdale's, Inc. to Massachusetts. Payment for the goods was made by credit card by a person who was present at the point of sale at the time of payment. The goods were shipped from Virginia and delivered to a recipient outside Virginia. Risk of loss remained with Bloomingdale's, Inc. until delivery in Massachusetts. There was no transfer of title or possession in the Commonwealth of Virginia. The transaction is not taxable under Virginia Code § 58.1-603, and is exempt under Virginia Code § 58.1.-1609.10(4).

3. Defendant Virginia Department of Taxation's Assessment against Applicant Bloomingdale's, Inc. for the period January 1, 1998 through December 31, 2001 is hereby corrected to reflect that no Virginia sales or use tax is due related to goods (i) never entering the Commonwealth of Virginia or (ii) delivered to out of state recipients, whether the recipient is the purchaser of the goods or another person. ENTER this 7 day of August, 2007.

Judge

Seen:

William L. S. Rowe (VSB No. 13728)

Mark C. Van Deusen (VSB No. 43673)

Eric H. Feiler (VSB No. 44048)

HUNTON & WILLIAMS LLP

Riverfront Plaza, East Tower

951 East Byrd Street

Richmond, Virginia 23219-4074

phone: (804) 788-8410

fax: (804) 788-8218

Counsel for Applicant Bloomingdale's, Inc.

Seen and Objected To:

Flora T. Hezel (VSB No. 47482)

Office of the Attorney General

900 East Main Street

Richmond, Virginia 23219

phone: (804) 786-8816

fax: (804) 786-1904

Counsel for Defendant Virginia Department of Taxation

A Copy,

Teste: BEVILL M. DEAN, CLERK

BY: ___D.C.