Tax Type
Retail Sales and Use Tax
Description
Installation charges not separately stated
Topic
Taxability of Persons and Transactions
Date Issued
10-02-1987
October 2, 1987
Re: §58.1-1821 Application/ Sales and Use Tax
Dear ***************
This will reply to your letter of March 26, 1987 seeking correction of an assessment issued in the above referenced case for the period December, 1983 through September, 1985.
FACTS
In connection with its work as an ********** (taxpayer) was assessed for the use tax on its untaxed purchases of tangible personal property from suppliers. The taxpayer contests the application of the tax to a portion of one purchase invoice which it claims represented a charge for nontaxable installation labor services performed by its supplier. In support of this contention the taxpayer has remitted a copy of a contract with its supplier, and a letter from the supplier indicating that a portion of the total charge to the taxpayer included charges for "on-site testing, personnel training, installation assistance and acceptance testing.
However, it is undisputed that the supplier made no separate charge for installation labor or services on the invoice to the taxpayer.
DETERMINATION
Virginia Code §58.1-603 imposes the sales tax on "the gross sales price of each item or article of tangible personal property when sold at retail or distributed in this State." (Emphasis added) The term "sales price", is then defined in §58.1-602(17) of the Code as not to include "an amount separately charged for labor or services rendered in installing, applying, or remodeling or repairing property sold..."
However, subsection (A) of §630-10-97.1 of the Virginia Retail Sales and Use Tax Regulations provides that the tax applies to "charges made for...any services included in or in connection with the sale of tangible personal property..."
The contract between the taxpayer and its supplier does not support its position that the contested amount only represented a payment for nontaxable labor. The contract states that in exchange for the total purchase price the supplier would provide certain generators and related accessories and services. However, it gives no description of what the accessories and services might include or what percentage of the total purchase price represented a charge for such accessories and services.
Furthermore, while the tax does not apply to separately stated amounts for "installation labor" in connection with sales of tangible personal property, as indicated in the Virginia Code section cited above, other amounts charged for services in connection with sales of tangible personal property such as personnel training, on-site testing, and installation assistance are subject to the tax.
Based on the information provided I find no basis for concluding that any portion of the amount contested represented an amount for installation labor. However, I will consider adjusting the assessment in this case if the taxpayer's can provide a more detailed breakdown from its supplier of all the components of the amount contested, within thirty days of the date of this letter. For example, this breakdown should segregate any installation labor charges from charges for personnel training, on-site testing, installation assistance, etc., performed by the supplier. This information should be sent to the department's Technical Services Section, Office Services Division, at P. O. Box 6-L, Richmond, Virginia 23282, within thirty days. If the requested information is not received within this time period, the remainder of the assessment will be immediately due and payable.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner