Tax Type
Retail Sales and Use Tax
Description
Floor contractors; Floor coverings
Topic
Taxability of Persons and Transactions
Date Issued
10-12-1984
October 12, 1984
Dear *****************
This will reply to your letter of September 14, 1984 in which you submit a request for a ruling on the correct application of the sales and use tax to various types of transactions involving the sales and/or installation of floor coverings.
§ 58-441.5 (a) of the Code of Virginia specifies that "any person who contracts.. to perform construction,...installation,...or any other service with respect to real estate or fixtures thereon, and in connection therewith to furnish tangible personal property, shall be deemed to have purchased such tangible personal property for use or consumption." Therefore, a business which contracts to install floor coverings would normally be deemed a contractor and should remit the tax on all purchases of property for use in performing its contracts.
However, Virginia Code § 58-441.1;(d) goes on to provide an exception to this general rule. That statute provides that "a person selling venetian blinds, window shades,...floor coverings (as distinguished from the floors themselves)...shall be deemed to be a retailer of such items and not a using or consuming contractor with respect to them, whether he sells to and installs such items for contractors or other customers."
Thus, a business such as ***** should charge the sales tax on all sales of floor coverings, but should pay the sales or use tax on all purchases of materials used in the installation of floors. The department has consistently used the test of permanent affixation to real estate to determine the difference between floors and floor coverings, i.e., flooring that is affixed to realty in such a manner as to be easily removable without material injury to the flooring or to the realty below is that which may be sold at retail Flooring which is not easily removed, including floor coverings which are glued or cemented down, is deemed to be consumed by the seller when installed. Therefore, persons selling and installing floor coverings which become permanently attached to real estate, including glued or cemented carpet, wood block, cork, tile, linoleum, and vinyl coverings are deemed to be using or consuming contractors with respect to them.
I will now answer your questions relating to specific transactions:
(1) Materials sold but not installed. A floor covering dealer is a retailer with respect to these items and needs to collect the tax from purchasers on the total sales price.
(2) Carpet installed tacked down. Carpet installed by the tack strip method is not permanently affixed to realty. Therefore, a floor covering dealer is a retailer with respect to such carpeting and needs to collect the tax from customers based upon the total sales price. Installation charges are not subject the tax if separately stated on the sales invoice; however, such charges are taxable if a lump-sum billing is used.
(3) Carpet glued down. As this carpet becomes permanently affixed to real estate, a floor covering dealer must pay the tax on all materials used in his capacity as a using or consuming contractor.
(4) Vinyl cut to fit, loose laid. Like carpet that is not permanently affixed to realty, vinyl is also deemed to be a product for retail sale when not glued, cemented or otherwise permanently attached to realty. Therefore, the tax should be collected from customers on such transactions.
(5) Vinyl perimeter glued only. This transaction involves the glueing of only the edges of vinyl floor covering to the real estate below. Inasmuch as the vast majority of floor covering installed in this manner can be removed easily, I consider this type of transaction to be a retail sale. Therefore, customers are subject to the sales tax when they purchase and have vinyl floor covering installed in this way.
(6) Vinyl fully glued. Fully glued vinyl becomes permanently affixed to realty; therefore, a floor covering dealer must remit the tax on this type of vinyl as a using or consuming contractor.
(7) Wood flooring fully glued down. Glued down wood flooring becomes permanently affixed to realty; therefore, a floor covering dealer should treat himself as a using or consuming contractor with respect to this type of flooring.
(8) Wood flooring installed by a floating, non-attached system. This type of flooring consists of planks glued together edge-to-edge and installed over a thin cushion. While the floor and cushion may be glued in spots, this flooring is easily removed without damage to real estate. As this type of flooring is not permanently affixed to realty, the tax should be collected from customers upon purchase.
(9) Custom made window treatments installed. Custom blinds and similar window treatments are not permanently affixed to realty and, therefore, the sale of such items should be taxed to the customer.
As noted previously, the sales tax to customers is computed upon the total charge from the sale, including installation charges unless separately stated on the sales invoice. For installations in which a floor covering dealer is a using or consuming contractor, the tax need only be paid on the purchase price of any materials used. Materials such as tack strip, nails, staples, glue, cement, etc. are taxable to floor covering dealers regardless of the type of installation.
Inasmuch as a floor covering dealer will likely be both a retailer and a using or consuming contractor, he may purchase all floor coverings and other similar items exclusive of the sales tax under a resale exemption certificate. However, when the dealer makes use of such inventory items as a using or consuming contractor, he should remit the tax to the department along with any tax collected on retail sales.
I hope that this will answer your questions; however, feel free to contact the department if further questions arise.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner