Tax Type
Retail Sales and Use Tax
Description
Fabricating contractor; Protective claim for refund
Topic
Payment and Refund
Date Issued
05-19-1988
May 19, 1988
Re: Protective Claim for Refund/ Sales and Use Tax
Dear*****************
This will reply to your letter of December 11, 1987 on behalf of ************* (taxpayer), seeking a refund of taxes paid for the audit period November 1981 through October 1984.
FACTS
In connection with its business as a fabricator of steel for sale on an installed basis, the taxpayer was audited and held liable for failing to pay the tax on purchases of industrial machinery and supplies used in its business. The taxpayer mistakenly failed to pay the tax on such items believing itself to be an exempt manufacturer, rather than a fabricating contractor taxable on all such purchases.
Pursuant to its contracts with customers, the taxpayer also accepted responsibility for the payment of all taxes. Therefore, while the taxpayer did not separately state charges for sales tax on any invoices to its customers, (since they were taken into consideration in setting its total charge to customers), it did remit tax to the department based on the fabricated cost price plus mark up of materials furnished to its customers. It is the department's understanding however that in some instances tax was not remitted to the department on these sales, such as when the taxpayer's customer had a direct payment permit or was located outside the state.
Accordingly, the taxpayer now seeks a refund of tax erroneously remitted based on the fabricated cost price plus mark up of materials sold to customers. The taxpayer also seeks a refund of all interest and penalties previously paid with respect to its purchases of industrial machinery and supplies.
RULING
Based on the authority granted in Virginia Code §58.1-1824, and provided the taxpayer is able to provide the department with the necessary documentation, I find basis for granting a refund to the taxpayer in this case based on the difference between its cost price of materials purchased and the amount of tax actually remitted to the department on the fabricated cost price, plus mark up of materials used in real estate construction contracts. Interest will be paid on any tax refunded to the taxpayer.
I find no basis however for the refund of interest assessed in the audit with respect to purchases by the taxpayer of industrial machinery and supplies for use in its fabrication business. Such interest on amounts which should have been paid by the taxpayer at the time of its purchases was properly assessed. Penalties were not assessed in the audit.
The department's district office will contact the taxpayer within the next thirty days to discuss the records which will have to be reviewed in order to compute the refund authorized herein.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner