Tax Type
Retail Sales and Use Tax
Description
Taxable users/consumers of tangible personal property that is purchased tax exempt
Topic
Exemptions
Date Issued
11-30-2004
November 30, 2004
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear **********:
This will reply to your letter in which you seek correction of a retail sales and use tax assessment issued to ********** (the "Taxpayer"), for the period September 2000 through September 2003. The Department's records indicate that the Taxpayer has paid the assessment in full. I apologize for the delay in the Department's response.
FACTS
The Taxpayer is a real property contractor that contracted with a nonprofit hospital (the "Hospital") to furnish and install a plumbing and HVAC system as part of the construction of a medical facility. The Taxpayer was audited by the Department and is contesting the assessment of use tax on chiller and cooling tower equipment and materials provided under this construction contract. The Hospital purchased the chiller and cooling tower equipment and materials exempt of the tax using the sales and use tax exemption for nonprofit hospitals in Va. Code § 58.1-609.7 4. The equipment and materials were then provided to contractors for installation on this job.
The Department assessed the Taxpayer use tax on the chiller and cooling tower equipment and materials based on the provisions of Va. Code § 58.1-610 B and Title 23 of the Virginia Administrative Code (VAC) 10-210-410 A, which state that contractors are the taxable users or consumers of tangible personal property that is purchased tax exempt and provided to the contractor for installation. The Taxpayer maintains that several subcontractors worked on this particular job and states that it is not liable for the use tax assessed on the chillers, cooling towers and related materials.
DETERMINATION
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- Virginia Code § 58.1-610 B states:
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- Any person who contracts to perform services in this Commonwealth and is furnished tangible personal property for use under the contract by the person, or his agent or representative, for whom the contract is performed, and a sales or use tax has not been paid to this Commonwealth by the person supplying the tangible personal property, shall be deemed to be the consumer of the tangible personal property so used, and shall pay a use tax based on the fair market value of the tangible personal property so used . . . .
The Taxpayer's contract proposal to the Hospital states, "We propose to furnish and install the plumbing / HVAC systems for the building to a point 5 feet out . . . .” The Taxpayer is clearly a contractor based on Title 23 VAC 10-210-410 A, which defines a contractor as "any person who contracts to perform construction . . . with respect to real estate or fixtures thereon . . . ."
The Taxpayer indicates that it did not perform all of the contract work for this job and, for that reason, should not be held liable for the use tax on the chiller and cooling tower equipment and materials used in the performance of the contract. Nonetheless, the Taxpayer contractually obligated itself to perform the work stated in the contract and is responsible for any sales and use taxes due on equipment and materials used in the performance of the contract. If the Taxpayer can provide contract information showing that another contractor was responsible for the installation of either the chiller or cooling tower equipment, the audit will be adjusted accordingly. Any such information should be provided within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Policy and Administration, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attention: *****. If the information is not furnished in the time allowed, the audit assessment will be considered correct.
The Code of Virginia and regulation sections cited are available on-line in the Department's Tax Policy Library, located at www.policylibrary.tax.virginia.gov. If you have any questions concerning this determination, please contact ***** at *****.
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- Sincerely,
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Kenneth W. Thorson
Tax Commissioner
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AR/50619S
Rulings of the Tax Commissioner