Tax Type
Retail Sales and Use Tax
Description
Purchases by lawn care contractor; Advertising materials; Sales for resale
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
08-09-1984
August 9, 1984
Re: §58-1118 Application/Sales and Use Tax
Dear ***************
This will reply to your letter of December 21, 1983 in which you submit an application for correction of sales and use tax assessed to as the result of an audit.
FACTS
***** (hereinafter *****) is engaged as a contractor performing seeding, erosion control, and lawn care services. An audit of ***** revealed a failure to remit the sales and use tax on various purchases of tangible personal property.
***** contests that assessment with respect to purchases of straw from dealers registered to collect the sales tax, purchases of spread lime and fees charged by subcontractors for the spreading of lime, and purchases of advertising materials. ***** requests relief, contending that registered dealers should be held liable for their failure to collect the tax on non-exempt sales; additionally, the corporation asserts that its subcontractors should be liable for the tax on lime purchased and spread by such subcontractors and that its advertising agency had paid the tax on the cost of printing performed for *****.
DETERMINATION
§ 58-441.4 of the Code of Virginia imposes a tax "upon every person who engages in the business of selling at retail or distributing tangible personal property" (the retail sales tax) while Virginia Code § 58-441.5 imposes a tax upon "the use or consumption of tangible personal property" (the use tax). These two separate taxes are in fact "one comprehensive tax on sales," United States v. Forst, 442 F.Supp. 920 (W.D.Va. 1977), affirmed, 569 F.2d 811 (4th Cir. 1978), with the use tax being applicable in cases in which the sales tax is not paid at the time of purchase. Accordingly, the combined sales and use tax must be remitted by either the seller or the purchaser.
While Virginia Code § 58-441.18 mandates that the tax be paid to the state by dealers, the "legal incidence of the Virginia sales tax is on the purchaser." United States v. Forst, supra. Accordingly, I must conclude that the assessment issued to ***** as the result of its failure to pay the use tax on its purchase of straw is valid and payable.
Inasmuch as ***** provides non-taxable landscaping services when it spreads lime for customers, the sales or use tax should be paid by the corporation on its purchases of lime and other items used in providing such services. However, when a subcontractor purchases and spreads lime and bills ***** for such services, it is the subcontractor who must remit the tax on purchases of lime. Any charges to ***** by ***** subcontractors who purchase and spread lime themselves will be removed from this audit accordingly.
Lastly, I find the imposition of tax upon charges from ***** to be proper based upon the department's existing policy with respect to advertising agencies. Notwithstanding the fact that paid tax on materials purchased by it from printers and that such materials eventually passed to ***** the advertising agency went beyond the rendition of advertising services and actually sold tangible personal property to *****. Such sales of brochures, flyers, mailers, etc. are subject to the tax as is any other sale of tangible personal property. However, ********* may obtain a refund of all sales tax paid to printers on materials purchased for resale to *****.
A Notice of Assessment, reflecting the revisions set forth above, will be issued shortly.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner