February 4, 2020
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****,
This is in response to your letter in which you seek correction of the retail sales and use tax assessment issued to ***** (the Taxpayer) as a result of an audit for the period from August 2012 through December 2016. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer is located in Virginia and designs, manufactures, and installs signs and building fascia used in facility branding. The Taxpayer also provides repairs and maintenance for existing signs. The Department’s auditor assessed sales tax on the Taxpayer’s sale and installation of a building sign and its support components affixed to a structure, and components described as “blue boxes.” The Taxpayer appeals a portion of the assessment on the grounds that the Department’s auditor incorrectly determined that the structural frame that connects the sign to the building is tangible personal property. The Taxpayer contends the structural frame is real property because it is a permanent architectural element of the building façade, and as such, the structural frame should be treated as a real property transaction subject to sales tax or use tax on the materials used in the sale.
DETERMINATION
The Department’s policy and treatment for sign manufacturing and installation businesses within Virginia at the time of the audit is well established. Effective July 1, 2005, Virginia Code § 58.1-602 included manufactured signs in its definition of tangible personal property. In Public Document (P.D.) 12-70 (3/5/12), the Department, relying on the Department’s fiscal impact statement for House Bill 2774 of the 2005 Virginia General Assembly, explained that the intent of the law change was to treat a transaction for the sale and installation of a manufactured sign as a sale of tangible personal property regardless of the fact that the sign may be attached to or become part of real property. The inclusion of manufactured signs in the Virginia Code § 58.1-602 definition of tangible personal property and the legislative intent of the change supersedes Title 23 of the Virginia Administrative Code (VAC) 10-210-4070 A, which provides that any person who constructs and installs signs or similar items that upon installation become incorporated into realty, is a contractor.
The Taxpayer states its sign support components, or “blue boxes,” were permanently installed onto the roof and structural components of the building and, thus, constituted an architectural addition that created depth and improved the appearance of the building. As such, the Taxpayer argues the blue boxes are separate and distinct from the sign, which the Taxpayer concedes is tangible personal property. The Taxpayer contends that the blue boxes should be classified as real property due to their installation and attachment on to the building. The Taxpayer also states the blue boxes are permanent but easily allow the replacement of the actual sign without additional structural changes to the building.
The Virginia General Assembly’s 2005 revision of the tangible personal property definition in Virginia Code § 58.1-602 specifically resolved questions of whether sign manufacturers and installers should be dealers in tangible personal property or real property contractors. Therefore, the inclusion of manufactured signs within the definition of tangible personal property requires both the sign and the blue boxes, or any structural addition constructed to support the sign, be taxed as tangible personal property. In accordance with Virginia Code § 58.1-602 and the Department’s previous determination in P.D. 12-70 (3/5/12), the auditor correctly determined the “blue boxes” as sign components affixed to the building structure constitute tangible personal property and appropriately assessed sales tax on the transaction.
CONCLUSION
Based on this determination, the assessment is correct. I note that the assessment has been paid in full; therefore, no further action is required.
The Code of Virginia sections, regulations, and public documents cited are available online at www.tax.virginia.gov in the Laws, Rules, and Decisions section of the Department’s website. Information regarding H.B. 2774 may be found at www.lis.virginia.gov under the database for the 2005 legislative session.
If you have any questions about this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1632.W