Tax Type
Retail Sales and Use Tax
Description
Fabricator; Out-of-state contractor
Topic
Taxability of Persons and Transactions
Date Issued
02-04-1985
February 4, 1985
Re: Request for Ruling/Sales and Use Tax
Dear **************
This will reply to your letter of October 31, 1984, in which you submit a request for a ruling on the applicability of the sales and use tax to certain steel fabrication contracts.
FACTS
************* is engaged in the fabrication of steel both for sale or resale and for its own use in real estate construction contracts. ***** has been awarded two contracts to furnish and fabricate steel for out-of-state construction projects. Normally, ***** would itself purchase the raw materials to be fabricated; however, under the two out-of-state contracts above, raw materials are to be purchased from ***** by the general contractors on the two projects. The raw materials will be shipped by ***** to ***** for fabrication. Subsequent to fabrication, ***** will ship the finished steel work to the out-of-state general contractors for erection.
***** requests a ruling as to the applicability of the Virginia sales and use tax to the raw materials shipped into Virginia by the general contractors for fabrication.
RULING
§1-37 of the Virginia Retail Sales and Use Tax Regulations provides that "[t]he tax applies to the charges for the fabrication of tangible personal property for users or consumers who furnish, either directly or indirectly, the materials used in the fabrication work." As an example, the regulation states that "a tailor who makes an article of wearing apparel from material furnished by the customer must collect and pay the tax on the charge for making the apparel."
Based upon the foregoing, ***** should normally charge and collect the sales tax on its total charge for fabricating raw materials provided by customers. As the tax is applicable in such situations to the fabrication charge, no sales and use tax is applicable to the purchase or use in Virginia of raw materials by customers since such materials are in essence being held for resale. While the tax should normally be applicable to the total charge made by ***** for the fabrication of steel, in this case, the fabricated steel is shipped by ***** to its customers outside of Virginia. Therefore, the transaction is governed by §1-51 of the Virginia Retail Sales and Use Tax Regulations on Interstate Commerce:
The tax does not apply to:
(a) Sales of tangible personal property delivered outside the state in the seller's vehicle;
(b) Sales of tangible personal property delivered outside the state by an independent trucker hired by the seller;
(c) Sales of tangible personal property delivered by the seller to a common carrier, a licensed contract carrier, or to the U. S. Post Office for transportation outside the state;
(d) Purchases for resale and immediate transportation out of this state by a dealer properly registered in another state, provided a valid certificate of exemption is secured by the Virginia seller
Therefore, based upon the foregoing, the contractors who will provide raw materials to ***** for fabrication will assume no sales and use tax liability simply because they have directed that the raw materials be shipped into Virginia for fabrication. Such contractors may provide ***** with resale exemption certificates for raw materials purchased. In addition, no liability will accrue to the contractors on the fabrication charges made by ************** provided that the finished steel work is shipped outside of Virginia by one of the methods listed in Regulation 1-51
Please feel free to contact the department if you have any further questions.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner