Tax Type
Retail Sales and Use Tax
Description
Fence sales and installation
Topic
Taxability of Persons and Transactions
Date Issued
11-29-1985
November 29, 1985
Re: Request for Ruling/Sales and Use Tax
Dear ****
This will reply to your letter of September 6, 1985 to *****, in which you request clarification of the issues discussed in my June 6, 1985 ruling to ***** and your July 16, 1985 meeting with members of the department's Tax Policy Division staff.
As noted in your most recent letter, your client is engaged in the furnishing and installation of fences as well as the retail selling of fencing materials. Your client operates three construction yards for the support of its fence installation activities and one other location which is the company's primary retail outlet. My ruling of June 6, 1985 stated that your client was to treat itself as a retailer with respect to its furnishing and installation of fencing based upon the provisions of Section 58.1-610.D of the Code of Virginia and Section 630-10-27.G of the Virginia Retail Sales and Use Tax Regulations.
The above ruling that your client must treat itself as a retailer with respect to fencing materials is not to be seen as an indication that no business dealing in fencing materials can be treated as a using or consuming contractor. Rather, each such business must be analyzed in light of Regulation §630-10-27.G to determine whether it is a retailer or contractor with respect to fencing materials.
As a retailer of fencing materials, your client will be required to collect the sales tax from its customers based upon the "sales price" (as defined in Section 630-10-95 of the Virginia Retail Sales and Use Tax Regulations) of the goods and related services sold. Of course, separately stated installation charges are not subject to the tax as provided in Regulation §630-10-95. As a retailer, your client may purchase fencing materials for resale exclusive of the tax when suppliers are provided with resale exemption certificates. You correctly note, however, that installation supplies such as nails, cement, concrete, sand, gravel, paint, putty, grout, and caulk are subject to tax.
Your client may make lump sum bids on fencing projects provided that the proper amount of tax is listed on invoices and/or other documents from retail transactions. Of course, your client will not be required to collect the tax on transactions involving the federal government or Virginian's state and local governments or any other entity enjoying a sales and use tax exemption on such transactions, provided that your client takes from each such customer a certificate of exemption.
Being unfamiliar with the exact nature of its product line, I cannot state conclusively that your client's status as a retailer is limited only to its fencing business. I am willing, however, to review any information that your client may wish to provide on the products listed in exhibit B to your letter and render a ruling on the applicability of the tax to each product.
The provisions of my June 6, 1985 ruling will not be applicable to contracts entered into before that date as your client was operating under a tentative ruling prior to that date. In such cases, your client may therefore treat itself as a contractor with respect to fencing materials, paying the sales tax itself on all materials used in such contracts. When your client pays tax on materials in another state and imports such materials into Virginia for use in pre - June 6, 1985 contracts, it will be entitled to a credit against the Virginia use tax for the sales tax paid to such other state.
Lastly, you inquire as to the possibility of your client receiving a credit against tax paid on materials initially stored in another state, but later withdrawn from storage for sale to Virginia customers. As the credit for taxes paid in another state, provided under Virginia Code Section 58.1-611, applies only to, "a person's use is this State of tangible personal property purchased by him in another state," I find no basis for granting a credit of the type sought by your client. Virginia in this case does not seek to tax your clients use of the property here, but its sale of the property to others.
Please feel free to contact the department if you have any further questions or concerns or if you wish to submit additional information on the products listed in exhibit B to your letter. As requested, your client will be provided six weeks from today in which to fully implement the changes to its accounting system made necessary by my June 6, 1985 ruling.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner