Did a campground owe tax on park trailers used as cabins, and did it have to tax campground accommodations?

Plain-English summary

Virginia upheld the campground's trailer assessment and required sales tax on its accommodation charges. The park trailers were built on a single chassis, mounted on wheels, equipped with a detachable hitch, 400 square feet or less, and not permanently attached to realty. Virginia therefore treated them as tangible personal property, not manufactured homes or modular buildings.

Because the campground used the trailers as cabins and lodges for customers, it was the consumer of that property. It should have paid sales tax to the vendor or accrued use tax on the full purchase price. The audit had assessed only 60% of the price under the modular-building rule; Virginia said the full price was proper, but the three-year limitations period prevented an additional assessment, so the existing amount stood.

The campground was also selling accommodations to transients whether customers used their own recreational vehicles, tents, or the campground's trailers. It had to collect Virginia sales tax on the accommodation charge and show that tax separately from Virginia Beach's transient occupancy tax.

Common questions

Q: Were the park trailers treated as modular buildings?
A: No. Their size, chassis, wheels, detachable hitch, recreational use, and lack of permanent attachment made them tangible personal property.

Q: Could the Department increase the audit to tax the trailers' full price?
A: Not in this appeal. Although full-price taxation was proper, the ruling said the limitations period for an additional assessment had expired.

Citations and references

• Va. Code §§ 58.1-602, 58.1-610.1, 58.1-625, 58.1-634, and 58.1-1822.
• 23 VAC 10-210-730(D) and 23 VAC 10-20-160(D)(6).
• Virginia Tax Bulletin 00-3.
• The ruling body cites Virginia Beach Code § 35-159(a); its footnote quotes § 35-196(a).

Subject

Charge and collect sales tax on the cost of accommodations at campground.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 12-64

Original ruling text

April 30, 2012

Re: § 58.1-1821 Application: Retail Sales and Use Tax

Dear *:

This is in response to your letter submitted on behalf of * (the "Taxpayer") in which you seek correction of the retail sales and use tax assessment issued for the period July 2007 through June 2010. I apologize for the delay in responding to your appeal.

FACTS

The Taxpayer is in the business of providing camping sites and facilities to its customers. The Taxpayer owns and operates a campground in Virginia Beach. In the audit, the auditor disagreed with the Taxpayer's collection of the tax on the fees paid by customers to use the Taxpayer's camping sites. The auditor views such fees as exempt admissions charges. The Taxpayer characterizes such fees as taxable registration charges. Based upon the auditor's conclusion, the Taxpayer was held taxable on the purchase of park trailers, also referred to as modular units, used at its campgrounds. The auditor applied the reduced tax rate for modular buildings and assessed the tax on the reduced purchase price of the park trailers, in accordance with Va. Code § 58.1-610.1 1

The Taxpayer disputes the tax and maintains that the park trailers used at its location were properly purchased exempt of the tax for rental to its customers. The Taxpayer maintains that the park trailers retain their characteristics of tangible personal property because the park trailers are on a chassis with axles, making the park trailers mobile and not permanently affixed to the real property. The Taxpayer cites certain federal authorities to support this position.

DETERMINATION

Classification of Park Trailers

The park trailers at issue are primarily designed and intended to provide temporary living quarters for recreation, camping or seasonal use. The park trailers are built on a single chassis, mounted on wheels and have a detachable hitch. Additionally, the park trailers are 400 square feet or less in living space and are not permanently attached to realty. Based upon these characteristics, the park trailers are deemed tangible personal property. Pursuant to the Housing and Urban Development (HUD) regulation, Part 3282.8(g), the park trailers are not considered manufactured homes. Accordingly, the park trailers are not considered modular buildings as defined in Va. Code § 58.1-602 for retail sales and use tax purposes.

The park trailers were purchased by the Taxpayer for the purpose of providing accommodations to its customers at its campground. The Taxpayer charges its customers based upon the type of accommodations needed. Some customers may come in their own recreational vehicles, requiring hookups to electricity and plumbing. Other customers may use their own tents, and may require hookups to electricity and plumbing, while others may utilize the park trailers (cabins and lodges) located on the Taxpayer's property.

Purchases of Tangible Personal Property

As a provider of accommodations, the Taxpayer is the user or consumer of all tangible personal property purchased and used in the provision of accommodations to its customers. Title 23 of the Virginia Administrative Code (VAC) 10-210-730 D addresses providers of lodgings and accommodations and states, "[p]urchases of furniture, linens, carpeting, drapes, and other tangible personal property by such businesses are taxable at the time of purchase." The Taxpayer should have paid sales tax to its vendor at the time of purchase, or the Taxpayer should have accrued and remitted use tax to the Department on the cost of the park trailers.

Basis of the Tax

In the audit, the tax was assessed on 60 percent of the base price of the park trailers, in accordance with Va. Code § 58.1-610.1. However, as previously stated, the park trailers are not modular buildings as considered in the statute, and the tax should have been assessed on the full price of the park trailers in the audit.

Under Va. Code § 58.1-1822, if an assessment appealed by a taxpayer "is less than the proper amount, the Tax Commissioner shall order that the applicant pay the proper taxes." Under this statute, the Tax Commissioner has the authority to increase a tax assessment as a result of a determination of an appeal filed under Va. Code § 58.1­1821. The Department's policy has been to make such assessments only if the statute of limitations for otherwise making an assessment has not expired. See Title 23 VAC 10-20-160 D 6.

Virginia Code § 58.1-634 prohibits the assessment of the additional amount of tax due because the three-year limitations period to assess has expired. Accordingly, the tax assessed in the audit is deemed correct and is upheld.

Sale of Lodgings and Accommodations

In all of the instances in which the Taxpayer makes charges to its customers, the Taxpayer is deemed a seller of accommodations to transients. As such, it is required to charge and collect sales tax on the cost charged for providing accommodations to its customers at its campground.

Virginia Code § 58.1-625 states, in pertinent part, "[t]he tax levied by this chapter shall be paid by the dealer, but the dealer shall separately state the amount of the tax and add such tax to the sales price or charge."

During the audit period, the Taxpayer collected the sales tax on the charges to its customers for accommodations at its campground. However, pursuant to Va. Code § 58.1-625, the Taxpayer is required to separately state the sales tax on the invoices to its customers. In addition, Virginia Beach Code § 35-159(a) levies a tax on transients purchasing accommodations 2 The Taxpayer must separately state the Virginia Beach transient occupancy tax from the Virginia sales tax on its invoices.

CONCLUSION

An updated bill, with interest accrued to date, will be mailed to the Taxpayer. No additional interest will accrue provided the outstanding assessment is paid within 30 days of the date of the bill. Please remit payment to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, Attn: *, Post Office Box 27203, Richmond, Virginia 23261-7203.

The Code of Virginia sections and regulation cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this response, you may contact * in the Department's Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-4598276111.P

1. . Virginia Tax Bulletin 00-3 (6/20/00) provides further clarification regarding the application of the retail sales and use tax on sales of modular buildings.

2. . Virginia Beach Code § 35-196(a) states, in pertinent part, "[t]here is hereby levied and imposed on each transient a tax equivalent to eight (8) percent of the total amount paid for lodging, by or for any transient, to any lodging place, plus a flat tax of one dollar ($1.00) for each night of lodging at any lodging place other than a campground."