Rulings of the Tax Commissioner
Document Number: 95-141
Tax Type:Retail Sales and Use Tax
Brief Description:Utilities; Wood pellets for domestic consumption
Topics:Taxability of Persons and Transactions
Date Issued:06/02/1995
June 2, 1995

Re: Request for Ruling: Retail Sales and Use Tax


This will reply to your letter of June 22, 1994 in which you seek information regarding the application of sales and use tax to*************, (the "Taxpayer"), relating to sales of wood pellets for use in home heating.

The Taxpayer is a dealer engaged in sales of pellet burning appliances and the pellets used to fuel such appliances. Pellet-fired appliances are an alternative to the traditional wood burning stoves and are used for residential heating. These appliances are fueled by pellets generally composed of wood by-product (sawdust, wood scraps, etc.) compressed into cylinder shaped pieces. The Taxpayer inquires whether these pellets qualify as fuel for domestic consumption and are thus exempt from the tax under Virginia Regulation (VR) 630-10-40.2.

VR 630-10-40.2, copy enclosed, exempts from the state sales and use tax purchases of artificial or propane gas, firewood, coal or heating oil for domestic consumption. Domestic consumption is defined as "the use of artificial or propane gas, firewood, coal, or home heating oil by an individual for other than business, commercial, or industrial purposes."

The pellet burning appliances sold by the Taxpayer serve the same purpose as the traditional wood burning stoves used by individuals for home heating purposes. As such, the pellets used to fuel these devices qualify for exemption under the regulation.

The Taxpayer's sales of the wood pellets for domestic consumption are exempt from the state sales tax, however the 1% local tax continues to apply to such sales unless the locality where the Taxpayer's place of business is located adopts an ordinance specifically exempting such sales. The enclosed regulation provides a list of localities that have adopted such an ordinance. Since the adoption of the regulation in 1985, several additional localities have notified the department that they have adopted such an ordinance: Botetourt County, Madison County, Prince George County, City of Portsmouth, and the City of Williamsburg. If the locality where the Taxpayer's place of business is located is not listed, it is suggested that the Taxpayer contact the locality to verify whether such an ordinance has been adopted.

The department is currently reviewing the policies set forth in VR 630-10-40.2 and the Taxpayer will be added to the department's industry mailing list for participation in this review process.

I hope the foregoing has responded to your inquiry and should you have additional questions, please contact**************.