Tax Type
Retail Sales and Use Tax
Description
Transitional provisions; Real estate construction contracts
Topic
Rate of Tax
Taxability of Persons and Transactions
Date Issued
03-31-1987
March 31, 1987
Re: Request for Ruling/Sales and Use Tax
Dear *****************
This will reply to your letter of March 5, 1987, in which you request clarification of my February 27, 1987 ruling.
Specifically, you wish to determine the application of the sales and use tax to leases of tangible personal property made pursuant to bona fide real estate construction contracts entered into prior to the enactment of the 1/2 % increase in the Virginia sales and use tax rate. Emergency Virginia Regulation 630-10-106 specifically addresses this point, stating that "[r]efunds of the additional 1/2 % sales and use tax paid on and after January 1, 1987 are available when tangible personal property is purchased or leased under a bona fide real estate construction contract entered into before October 27, 1986." Emphasis added
Therefore, so long as the bona fide real estate construction contract contains a specific and stated date of completion, refunds of the additional 1/2 % tax are available for property leased by the contractor, provided he takes delivery on or before the stated completion date of the project. Unlike lease agreements that are not made pursuant to bona fide real estate construction contracts, the date that the lease agreement was entered into is not of any consequence in this instance, so long as the property is delivered to the contractor prior to the stated completion date.
Refunds of the additional 1/2 % tax will be limited, however, only to leased property that is used exclusively in performing a bona fide real estate construction contract.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner