Tax Type
Retail Sales and Use Tax
Description
No sales tax on the sale and installation of certain items placed on temporary foundations.
Topic
Exemptions
Taxable Transactions
Date Issued
03-05-2012
March 5, 2012
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in response to your letter in which you request a ruling in regard to the application of the retail sales and use tax to the sale of installed materials and labor by your unidentified client (the "Taxpayer") to customers in Virginia. I apologize for the delay in responding to your request.
FACTS
The Taxpayer sells general hardware, plumbing, electrical items and repair items for manufactured homes, including heating and air conditioning units and appliances. Its customers are primarily retail dealers, service companies, and parts stores.
In certain situations, the Taxpayer will install heating and air conditioning units, skirting, anchors, and/or steps at the request of its customer. The Taxpayer engages local independent third-party installers to perform the installation services. It does not employ any installers.
The Taxpayer bills customers for the installed materials and the labor but does not charge sales tax on the sale because the customer has furnished a resale certificate. The Taxpayer understands that its retail dealer customers charge sales tax to the end user on the total price of the manufactured home, including the installed items.
The Taxpayer requests guidance on whether it owes use tax on the cost price of the materials installed for its customers, or whether it is correct in not charging and collecting sales tax from its customers on the sale and installation of these materials. If the Taxpayer is liable for use tax on the cost price of the installed materials, it requests a voluntary disclosure agreement for the use tax due on the installed materials.
RULING
Skirting, Anchors and Steps
Prior to July 1, 1991, set-up components for manufactured homes as defined in Va. Code § 36-85.3 were subject to the 4.5% retail sales and use tax administered by the Virginia Department of Taxation. As a result of Public Document (P.D.) 91-125 (7/19/91), the policy for applying the tax to set-up components changed. Effective July 1, 1991, all set-up components that become an integral part of a manufactured home (formerly known as a mobile home) as defined in Va. Code § 36-85.3, and that are attached or purchased at the time such home is sold shall be included as part of the sale price of the manufactured home and taxed at the motor vehicle sales and use tax rate of 3%. This tax is administered by the Virginia Department of Motor Vehicles.
Pursuant to P.D. 91-125, set-up components for manufactured homes include concrete blocks, wooden wedges, concrete footers, steps, blocking boards, anchors, anchor strapping, anchor nuts and bolts, strap buckles, roof brackets, foundation skirting, awnings, plumbing waste pipe and fittings, water pipe and fittings, bolts, screws, nails, electrical wiring, disconnect boxes, circuit breakers, connectors, conduit pipes, ground rods, electric adapters, heat tape, carpet tape, insulation, caulk sealant, and roof flashing. In P.D. 98-100 (5/22/98), entrance/exit stairs or steps were deemed not to be set-up components and were thus subject to the retail sales and use tax. Upon closer examination of P.D. 98-100, I find that such ruling was not intended as a change in the policy set out in P.D. 91-125, which treated steps included in the sales price of a manufactured home as set-up components subject to the 3% motor vehicle sales and use tax. Accordingly, the 3% motor vehicle sales and use tax may be imposed on entrance/exit stair's or steps when they are sold as an integral part of a manufactured home and included in the sales price of a manufactured home. For this reason, I am rescinding the part of P.D. 98-100 that does not treat entrance/exit stairs or steps as set-up components, for manufactured homes.
Accordingly, the 3% motor vehicle sales and use tax applies to steps, anchors, skirting and other set-up components installed in manufactured homes and included in the sales price of such homes. This tax treatment generally applies to a manufactured home that remains tangible personal property upon installation, such as one erected on a temporary foundation. In the event the set-up components, including steps, are not included in the sales price of such manufactured home, they are subject to the current 5% retail sales and use tax.
In contrast, when a manufactured home is affixed to a permanent foundation and included in the sale of real estate, the set-up components are subject to the 5% retail sales and use tax.
Heating and Air Conditioning Units
When a heating and air conditioning unit is installed in a manufactured home, it may or may not be considered a real property installation. As pointed out above, a manufactured home as defined in Va. Code § 36-85.3 may or may not be affixed to a permanent foundation.
When a heating and air conditioning unit is attached to a manufactured home that is set up upon a temporary foundation, the unit is deemed to remain tangible personal property upon installation. In this regard, I would note the guidance set out in P. D. 85-65 (3/27/85), which provides the following:
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- Mobile homes subject to the motor vehicle sales and use tax are exempt from the retail sales and use tax under the (former) provisions of Section 58.1-608.7 of the Code of Virginia (now exempt under § 58.1-609.1 2). Therefore, if tangible personal property sold with a mobile home is subject to the motor vehicle sales and use tax, it is therefore exempt from the retail sales and use tax. [Inserts and emphasis added.]
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- Accordingly, when a heating and air conditioning unit remains tangible personal property after installation, it is considered attached to the manufactured home and subject to the motor vehicle sales and use tax provided the charge for the unit is included in the sales price of the manufactured home. In such instances, the retail sales and use tax would not apply.
When a heating and air conditioning unit is attached to a manufactured home that is erected on a permanent foundation and the home is intended to become real property, such unit becomes a fixture to the real property. In such instances, the person that contracts to install such unit is generally treated as the consuming contractor regardless of whether' he or someone else furnishes the unit or whether such person is the installer or engages someone else to perform the installation. See Va. Code § 58.1-610 B. A consuming contractor is the one liable for the tax on the cost price of such installed equipment. When such equipment is purchased or stored within Virginia and then subsequently installed in real property outside Virginia, the Virginia retail sales or use tax still applies.
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- CONCLUSION
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Based on the facts presented, it appears that the manufactured homes are installed upon temporary foundations and remain tangible personal property upon installation. As such, the Taxpayer is correct in not charging and collecting the retail sales tax from its customers on the sale and installation of steps, anchors, skirting, and heating and air conditioning units that are furnished for manufactured homes when placed on temporary foundations, provided the following conditions are met: (1) The Taxpayer has received a valid resale exemption certificate that is signed, timely dated and completed in full by the customer; (2) the charge for such items are included in the sale price of such homes; and (3) such sales price is subject to the motor vehicle sales and use tax.
Notwithstanding the foregoing, the Taxpayer may request a voluntary disclosure agreement with the Department if it is liable for the 5% use tax as a result of this ruling. The Taxpayer's proposal, tax reports, tax payment and registration application should be sent to the attention of ***** at the Virginia Department of Taxation, Voluntary Disclosure Program, Post Office Box 5640, Richmond, Virginia 23220. If you have any questions about such agreement, you may contact: ***** at *****.
This response is made based on the facts provided as summarized above. Any change in facts or the introduction of new facts may lead to a different result.
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- The Code of Virginia sections and public documents 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 ruling, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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Craig M. Burns
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- Tax Commissioner
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AR/1-4718421984.R
Rulings of the Tax Commissioner