Tax Type
Retail Sales and Use Tax
Description
Longarm quilter clients to pay sales tax on the sales price, cost of materials and labor.
Topic
Tangible Personal Property
Taxability of Persons and Transactions
Date Issued
01-21-2011
January 21, 2011
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the "Taxpayer") requesting a ruling on the application of the retail sales and use tax to charges for quilting.
FACTS
The Taxpayer is a professional longarm quilter and owns an industrial sized quilting machine. The Taxpayer's clients bring completed quilt tops to the Taxpayer, along with the backing fabric and batting that goes in between the two layers. The Taxpayer puts the three pieces together by quilting all three layers in a design agreed upon with the clients. The quilted piece is returned to the clients with one edge still open. The clients place binding around the perimeter of the quilt after the quilt is returned to them by the Taxpayer.
The Taxpayer states that the majority of the total cost to its clients is for labor. The only material used by the Taxpayer is thread, which represents about 2 to 3 percent of the total cost. In instances where the Taxpayer provides the batting to its clients, the Taxpayer charges its clients separately for the batting. The Taxpayer further states that for the time that it has been in business, it has been charging the retail sales and use tax on the entire charge for labor arid materials to its clients.
RULING
Pursuant to Va. Code § 58.1-602, the term "sale" subject to the retail sales and use tax includes "the fabrication of tangible personal property for consumers who furnish, either directly or indirectly, the materials used in fabrication ...."
Title 23 of the Virginia Administrative Code (VAC) 10-210-560 A states, "An operation which changes the form or state of tangible personal property is fabrication."
Title 23 VAC 10-210-560 B states, "A person regularly engaged in the fabrication of tangible personal property for sale at retail must collect and pay the tax on the sales price of the property." [Emphasis added.]
Virginia Code § 58.1-602 defines sales price as:
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- The total amount for which tangible personal property or services are sold, including any services that are a part of the sale, valued in money, whether paid in money or otherwise, and includes any, amount for which credit is given to the purchaser, consumer, or lessee by the dealer, without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any other expenses whatsoever. [Emphasis added.]
Pursuant to the aforementioned authorities, the quilting work performed by the Taxpayer for its clients is fabrication. Accordingly, the Taxpayer should charge its clients sales tax on the sales price, which includes the cost of materials and the cost of labor.
This response is based on the facts provided as summarized above. Any change in facts or the introduction of new facts may lead to a different result.
The Code of Virginia sections and regulation cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this response, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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- Linda D. Foster
Deputy Tax Commissioner
- Linda D. Foster
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AR/1-4531895886.P
Rulings of the Tax Commissioner