The Virginia Fuel Sales Tax and how it affects fuel for BBQs, home heating, and fuel purchases for other domestic use. Virginia levies a sales tax at both the state and local level. The state rate is 4.3%, with an additional .7% charged in the Northern Virginia and Hampton Roads Regions. The local tax is 1% across the entire state. The vast majority of goods and services are taxed identically at the state and local level, with some minor exceptions, such as food for home consumption, which is taxed at a reduced rate at the state level but is subject to the standard 1% local tax. An area where the state and the locals differ significantly is the treatment of fuel for domestic consumption. This differing treatment often causes confusion with taxpayers given the otherwise harmonious treatment of most goods and services at the state and local level. Taxing Propane Gas, Firewood, Coal or Home Heating Oil The state sales and use tax does not apply to purchases of fuel for domestic consumption, which is defined as the use of propane gas, firewood, coal or home heating oil by an individual for a use other than business, commercial or industrial purposes. Local jurisdictions must adopt an ordinance in order to provide a parallel exemption from local taxation. The code section which contains this exemption (23VAC10-210-630) contains a list of cities and counties that have notified the Virginia Department of Revenue that they have adopted such an ordinance. Unfortunately, the list is from 1982. Over the last thirty plus years many of the listed jurisdictions have rescinded their ordinances, while others have added the exemption. Fortunately, the Taxware Tax Research Department has analyzed the municipal codes of every Virginia local and has accurately determined which jurisdictions currently have a local exemption for fuel for domestic consumption. What and Where the Domestic Fuel Tax Applies Not only is the issue of WHERE fuel for domestic consumption is exempt a confusing one, so is the issue of WHAT constitutes this category of fuel. Several recent Virginia revenue rulings have attempted to clarify the matter. To verify that the usage of the fuel is for domestic consumption, an exemption certificate must be presented unless 1) the sale is clearly identifiable as a sale of fuel for domestic consumption or 2) the sale is a small quantity of fuel. While the regulation is silent as to what constitutes a small amount, a January 2014 revenue ruling states that a small portable propane gas tank (34 pound tank or smaller) qualifies as a small amount. Anything larger and the invoice must clearly state the fuel is for domestic consumption if an exemption certificate is not used. Propane used for all types of outdoor cooking purposes and for temporarily heating spaces (garages, sheds, patios, etc.) qualifies for the exemption. The charge for propane sold for domestic consumption is exempt from the state sales tax; however this treatment does not apply to the tank. If otherwise exempt propane is sold in conjunction with a tank, and the invoice only contains a single lump-sum charge, the entire transaction is taxable. However, if the propane and tank are separately stated the propane charge would be exempt while the tank charge would be taxable. If a customer trades in an empty tank for a pre-filled propane tank, the entire charge would be exempt because the new tank is not being purchased, instead it is acquired through the exchange of the old tank. A Constantly Evolving Regulation The taxability of fuel for domestic consumption is a still evolving area of regulation, as evidenced by several Virginia Department of Revenue rulings that have addressed the subject in 2014. This, coupled with the varying treatments of local jurisdictions, can make compliance particularly difficult. The Taxware Tax Research Department is actively monitoring for changes to local exemptions and regulatory updates from the state, ensuring that fuel for domestic consumption does not turn into a combustible issue for your organization.
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