Tax Type
Retail Sales and Use Tax
Description
Fencing invoices
Topic
Collection 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 February 19, 1987, in which you submit a request for a ruling regarding the necessity of your client separately stating the sales tax on the invoices furnished to its customers.
FACTS
*********** (Taxpayer) is engaged in the sale and installation of fencing and related products. The taxpayer was deemed in a June 16, 1985 ruling to be a retailer with respect to fencing, rather than a contractor respecting real estate. Further, the taxpayer was advised in a November 29, 1985 ruling that it need not separately state the sales tax on bids submitted for the furnishing and installation of fencing, however, the taxpayer was advised that the tax must be separately listed on "invoices and/or other documents from retail transactions."
Based upon the department's November 29, 1985 ruling, the taxpayer proposes to note on the invoices furnished to customers that all applicable sales tax is included in the lump sum invoice price. The taxpayer will then retain within its records specific information as to the amount of sales tax collected from each customer. Such internal accounting, the taxpayer contends, constitutes a record of its transactions in accordance with the November 29, 1985 ruling and Virginia Regulation 630-10-24.
RULING
§58.1-625 of the Code of Virginia provides that "[t]he tax ... shall be paid by the dealer, but the dealer shall separately state the amount of the tax and add such tax to the sales price or charge." The statute goes on to note that "[t]hereafter such (separately stated) tax shall be a debt from the purchaser, consumer, or lessee to the dealer until paid and shall be recoverable at law in the same manner as other debts." Virginia Regulation 630-10-24.A restates the above statutory provisions, adding further that "[i]dentification of the tax by a separate writing or symbol is not required provided the amount of tax is shown on a separate item on the record of the transaction."
The above statute and regulation clearly set forth the requirement that the tax be separately listed and added to the price of goods sold at retail. Thus, when the taxpayer merely adds the tax to the sales price of fencing materials but does not separately list the tax on customer invoices, it only meets one-half of the statutory and regulatory requirement
The taxpayer contends that by listing the tax on its internal documents, it meets the regulatory test of showing the tax "on the record of the transaction." However when reading the statute and regulations in whole, the clear intent is that the tax must be separately listed on the sale document between the seller and the purchaser. This intent is clearly evident in the provisions that make the separately stated tax the legal debt of the purchaser.
Further, the accounting procedure proposed by the taxpayer would pose significant administrative problems for the department in the event that a customer of the taxpayer is audited. Certainly, if the tax is not separately stated on the invoices furnished to customers, the department would be unable to verify that the proper amount of tax was paid on the customer's purchases from the taxpayer.
As stated in my November 29, 1985 ruling, the taxpayer may continue to submit bids on fencing projects without separately stating the sales tax. However, the tax must be separately listed on the invoices or other records of sale that are furnished to customers.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner