Tax Type
Retail Sales and Use Tax
Description
Construction
Topic
Taxability of Persons and Transactions
Date Issued
04-23-1999
April 23, 1999
Re: Request for Ruling: Retail Sales and Use Tax
Dear*****
This will reply to your request for a ruling concerning the application of the retail sales and use tax to purchases made by the ***** (the ***** "Authority') for use by construction contractors.
FACTS
The Authority was created under the passed by the 1996 General Assembly. Code of Virginia §23-50.16:3 states that the Authority is a political subdivision of the Commonwealth of Virginia. The Authority has contracted with another party to construct an addition to *********. The Authority wishes to know if the sales and use tax exemption for governmental entities applies to purchases of materials and equipment which are furnished to construction contractors for use in the Performance of the construction contract.
The developer and manager of the project will review purchase requisitions received from the project's general contractor and subcontractors. The developer will forward the approved requisitions to the Authority. The Authority will then issue purchase orders to suppliers and vendors who will invoice the Authority for the purchases. After delivery of the purchases is confirmed, the Authority will pay the suppliers and vendors with funds drawn on the Authority's bank account. The credit of the Authority will be bound by these purchases, and the construction contract between the Authority and the developer contains language to this effect.
RULING
Code of Virginia § 58.1-609.1(4) provides a sales and use tax exemption for "[t]angible personal property for use or consumption by the Commonwealth, any political subdivision of the Commonwealth, or the United States.' The Authority was created as a political subdivision of the Commonwealth of Virginia; therefore, the exemption above applies to the Authority's purchases of tangible personal property.
Code of Virginia § 58.1-610(B) makes contractors liable for use tax on property furnished to them by another party that has purchased the property exempt of the tax. However, this same paragraph excludes tangible personal property that is purchased exempt of the tax under § 58.1-609.1(4) and furnished to a contractor. The enclosed copy of Title 23 of the Virginia Administrative Code (VAC) 10-210-410(J) states that contractors are generally considered the taxable users and consumers of purchases of tangible personal property made in connection with real property construction contracts with the government of Virginia. The same paragraph also states that contractors are not subject to the use tax when provided with tangible personal property purchased by a governmental entity for use in real property construction contracts.'
Based on the information provided and the purchasing procedures described in the Authority's letter, the Authority may purchase tangible personal property exempt of the tax by providing vendors with a properly completed Form ST-12, copy enclosed. The property may be furnished to those contractors performing services in connection with the real property contract previously described. The subsequent use of this property by the contractors will not create a use tax liability for purposes of this project. The Authority should note that any purchases made by the contractors or subcontractors for use and consumption by them are subject to the tax as discussed in 23 VAC 10-210-410.
If you have any questions concerning this matter, please contact ***** in the Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/21900S
Rulings of the Tax Commissioner