Ruling Request No. 92-01

Re: Request for Declaratory Ruling on Taxability of Certain Purchases from Out-of-State Vendors

Facts

A certain door company ("the company") engages in construction business in Massachusetts and Rhode Island and its office and warehouse is located in Warwick, Rhode Island. The company purchases stock doors for inventory without knowledge of the doors final distribution. The doors are shipped from Pennsylvania FOB Warwick, Rhode Island. The company has been reporting and paying Rhode Island use tax on these purchases.

In addition to stock doors, the company purchases specialty doors ordered for jobs. The company pays use tax to the state where the doors are used.

Ruling Requested

The company requests confirmation that it properly pays the use tax to Rhode Island on the doors purchased for inventory and stored in Rhode Island and that the specialty doors purchased for specific jobs outside the state are exempt from tax in Rhode Island.

Discussion

R.I.G.L. 44-18-11 reads as follows:

44-18-11. Storage or use for export. --"Storage" and "use" do not include the keeping, retaining, or exercising of any right or power over tangible personal property shipped or brought into this state for the purpose of subsequently transporting the property outside the state for use thereafter solely outside the state, or for the purpose of being processed, fabricated, or manufactured into, attached to, or incorporated into, other tangible personal property to be transported outside the state and thereafter used solely outside the state.

The exemption granted by section 44-18-11 only applies to tangible personal property which is shipped or brought into Rhode Island, stored here temporarily and then withdrawn from storage to be used solely outside this state. Paul Arpin Van Lines Co. v. Norberg, 346 A. 2d 655 (1975). If, however, the interstate journey is interrupted for reasons of convenience or business needs of the owner, the interstate character of the journey ceases and taxation by a state is possible. Safeway Systems, Inc. v. Norberg, 341 A.2d 47 (1975).

The "stock" doors purchased by the company are not brought into this state for the purpose of being stored here temporarily to be withdrawn from storage to be used solely outside the state. The company purchases the stock doors for inventory without any knowledge of the doors final destination. The doors may never leave the state. They are strictly inventory items to be used at the convenience of the company. Their interstate journey is therefore at an end when placed in inventory at the company's convenience.

The "specialty" doors are designed and built to a customer's specifications and destined for use in the state where the customer is located. They are purchased with full knowledge of the final destination of the door. The shipment of the specialty doors into this state is therefore a part of their interstate journey for use solely outside the state.

Ruling

The company is properly paying a use tax on stock doors shipped into this state and placed into the taxpayer's inventory.

Specialty doors purchased for specific customers located outside the state are exempt from tax under R.I.G.L. 44-18-11 when shipped from outside the state, and stored here temporarily before resuming their interstate journey for use solely outside the state.

This ruling may be relied upon by the company and shall be valid until the applicable statutory provisions are amended in a manner requiring a different result or until the underlying factual presentation changes.

R. Gary Clark

Tax Administrator

January 28, 1992