Tax Type
Retail Sales and Use Tax
Description
Contractor invoices; Landscaper; Awnings
Topic
Collection of Tax
Taxability of Persons and Transactions
Date Issued
02-27-1987
February 27, 1987
Re: §58.1-1821 Application/ Sales and Use Tax
Dear *********************
This will reply to your letter of October 14, 1986 seeking correction of an assessment issued in the above referenced case for the period July, 1983 through May, 1986.
FACTS
In connection with its business as a building and industrial construction contractor ***** (Taxpayer) was assessed consumer use tax on its untaxed purchases of certain items used in various construction projects. The taxpayer contests certain of these purchases which it claims were improperly invoiced by its subcontractors at the time of purchase. While apparently unavailable at the time of the audit, the taxpayer has now provided the department with corrected invoices or other documentation from some of its subcontractors for several contested items showing that the tax was paid at the time of purchase or explaining why the tax should not have been collected by the subcontractor.
The taxpayer contends further that in those instances where its subcontractors improperly collected and reported the tax, the department should pursue such subcontractors for the tax rather than the taxpayer.
DETERMINATION
The audit will be adjusted in this case to remove those items for which the taxpayer has provided invoices showing that it properly paid the tax to its subcontractors at the time of purchase. However, with respect to those invoices provided by the taxpayer from landscape contractors, the tax appears to have been incorrectly computed. The department has traditionally deemed nurserymen, landscape contractors and others who sell and transplant trees, shrubs, sod, and other landscaping materials to be retailers. Consistent with this policy of long standing, §630-10-40 of the Retail Sales and Use Tax Regulations provides:
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- When a nurseryman, florist or other person makes retail sales of shrubbery and similar items, and as part of the transaction agrees to transplant them on the land of the purchaser for a lump sum, the tax applies to the total charge. The tax does not apply to the charge for transplanting if the charge is separately stated on the invoice.
- When a nurseryman, florist or other person makes retail sales of shrubbery and similar items, and as part of the transaction agrees to transplant them on the land of the purchaser for a lump sum, the tax applies to the total charge. The tax does not apply to the charge for transplanting if the charge is separately stated on the invoice.
With respect to the taxpayer's purchases from an awning seller and installer, the correct application of the tax is determined by reference to §630-10-27(G) of the Retail Sales and Use Tax Regulations. Under this section, "[a] person selling and installing tangible personal property that becomes real property after installation is generally considered a contractor, except that a retailer selling and installing fences. venetian blinds, window shades, awnings, storm windows and doors. etc., is not classified as a using or consuming contractor with respect to them."(Emphasis added) The term "retailer" is then defined for purposes of this section to mean, "any person who maintains a retail or wholesale place of business, an inventory of the aforementioned items and/or materials which enter into or become a component part of the aforementioned items, and who performs installation as part of or incidental to the sale of the aforementioned items."
However, this section also provides that "[p]ersons who are not classified as retailers within the definition set forth above and who sell and install fences, venetian blinds, [awnings,] etc., are deemed to be contractors and must pay the sales tax on such items at the time of purchase."
Inasmuch as the taxpayer's awning seller and installer considered itself to be a using and consuming contractor and paid the tax on all materials purchased for use in its contract with the taxpayer. I will remove the amounts charged by this seller from the audit assessment.
In addition, while it is true that the taxpayer's vendors in this case were obligated to properly collect and report the tax on their sales to the taxpayer, the department may look to either the vendor or the purchaser for such tax liability. For example, the Fourth Circuit Court of Appeals has held that, "[a]lthough the seller is legally obligated to collect the tax from the purchaser, the statute, [Virginia Code §58.1-6251, makes the tax the legal debt of the purchaser." See, United States v. Forst. 559 F. 2d 811. (4th Cir. 1978).
I will give the taxpayer an additional thirty (30) days from the date of this letter to provide the department with any other documentation/ invoices showing that the tax was actually paid to any of its suppliers at the time of purchase. Such invoices should be remitted to the department's Technical Services Section, office Services Division, P. O. Box 6-L, Richmond, Virginia 23282, within thirty days.
Therefore, based on all of the foregoing, after the end of the thirty day period mentioned above. the assessment will be revised and reissued to the taxpayer in accordance with the terms of this letter.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner