Tax Type
Retail Sales and Use Tax
Description
Modular building sales and installation
Topic
Taxability of Persons and Transactions
Date Issued
09-15-1987
September 15, 1987
Re: Ruling Request/ Sales and Use Tax
Dear ***********************
This will reply to your letter of July 23, 1987 seeking information on the correct application of the sales and use tax to the sale and installation by ***************** (taxpayer), of one-unit modular buildings made of concrete and steel for Virginia customers.
FACTS
According to the information enclosed with your letter, the taxpayer is engaged in the manufacture of the above mentioned modular buildings in its Florida factory for use as branch banks, fast food restaurants, professional offices, gas marts, health clinics, etc. In general, the taxpayer ships the buildings to its Virginia customers with fully tested plumbing, heating, and air conditioning systems in place. Some buildings are also shipped with floor tiles, furnishings, bathroom fixtures, and pictures for walls already in place, according to customer specifications. After shipment of the buildings to its Virginia customers, the taxpayer provides installation work at the job site.
Accordingly, the taxpayer seeks a ruling on the correct application of the tax to the sale and installation of the modular buildings for Virginia customers.
RULING
§58.1-610 of the Virginia Code provides that "[a]ny person who contracts... to perform construction, reconstruction, installation, repair, 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." In addition, the statute provides that "[a]ny sale...to...such person shall be deemed a sale...to...the ultimate consumer and not for resale." Thus, a contractor respecting real estate is deemed to be the taxable user or consumer of all materials furnished under a contract to erect or install property that will become affixed to realty and does not collect the sales tax from his customers when performing such contracts.
Since the modular buildings sold and installed by the taxpayer become a part of realty and are assessed as real property (rather than tangible personal property) for Virginia local tax purposes, I conclude that the taxpayer acts as a contractor respecting real estate when it sells and installs such buildings, together with any fixtures permanently affixed thereto, for Virginia customers. Accordingly, the taxpayer will be subject to the tax on any materials, equipment, etc., used to construct buildings for Virginia customers, subject to a nonrefundable credit for any tax paid on such materials, equipment, etc., in the state in which they were purchased. In addition, the taxpayer will not need to collect the sales tax from its Virginia customers. For example, if the taxpayer pays Florida sales tax on its purchases of materials used in the fabrication of the modular buildings, the taxpayer may claim a credit against Virginia's use tax to the extent of such Florida sales tax previously paid, in an amount not to exceed the amount of the Virginia tax.
However, while the taxpayer is a contractor for purposes of the modular buildings, (and fixtures attached thereto), which it installs for Virginia customers, it will be considered a retailer with respect to buildings which it sells without installation. Accordingly, the taxpayer would be required to collect the tax on the total sales price of any modular building which it sells to a Virginia customer for its own installation or to a Virginia contractor for installation for a customer. In addition, the taxpayer will be considered a retailer with respect to any other items of tangible personal property which it provides to its Virginia customers in connection with its installation of the modular buildings, but which do not become permanently affixed to the buildings, such as wall pictures, furniture, and similar items.
For your further information, I have enclosed copies of two rulings issued by the department, dated April 3, 1985 and April 21, 1987, in closely related cases, together with applicable sales and use tax regulation sections. I hope that all of the foregoing has responded to your questions, but let me know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner