Tax Type
Retail Sales and Use Tax
Description
Selling and installing fences
Topic
Taxability of Persons and Transactions
Date Issued
07-06-1988
July 6, 1988
Re: §58.1-1821 Application/Retail Sales and Use Tax
Dear****************
This will reply to your letter of March 8, 1988, seeking the correction of an assessment issued in the above referenced case for the period February, 1985, through November, 1987.
FACTS
********** ("The Taxpayer") is in the business of selling and installing fences. The Taxpayer operated as a retailer for the period of November, 1984 through May, 1985, and as a contractor for the remainder of the audit period. The Tax Commissioner ruled on May 28, 1985, that the Taxpayer is to be treated as a using and consuming contractor. The audit report does reflect this change from retailer to contractor.
The Taxpayer contends that the responsibility for collection and remittance of the tax is upon suppliers. The Taxpayer also requests a refund of tax paid on invoices during January, 1985, a credit for taxes paid to Maryland, and a deletion of assessment on a California invoice where the materials were returned to the supplier.
DETERMINATION
A real estate construction contraction is liable for payment of tax on the purchase of all materials used in the construction. Even though a supplier of materials is obligated to collect the sales tax on purchases by contractors, there is a concomitant duty on part of the Taxpayer [contractor] to pay the tax.
The sales tax and the use tax are complementary taxes. While the seller is obligated to collect the sales tax on sales, if he does not, the purchaser has an equal obligation to accrue and remit the use tax. In addition Virginia has no authority to require out of state dealers to collect the tax if they have no presence in the state. Thus, when materials are purchased from such dealers, the only obligation for payment of the tax rests with the Virginia purchaser.
In addition, there is a possibility that the Taxpayer was not charged sales tax as a consuming contractor because of the status change from retailer to contractor,. void sales tax exemption certificates may still have been on file with suppliers. Therefore, I find no basis for the adjustment of the audit on the grounds that the tax obligation rests exclusively with the seller.
The Taxpayer may not receive a refund on tax paid during the month of January 1985. Pursuant to Virginia Code §58.1-1823, any claim for refund must be made within three years from the due date of the tax. The statute of limitations for the period of January, 1985, therefore, expired on February 20, 1988, prior to the filing of any claim for refund.
Taxpayer also requests: 1) credit for taxes paid to Maryland and, 2) deletion of the tax assessed on a California invoice where the Taxpayer claims to have returned the materials. If the Taxpayer can provide proper documentation (i.e., invoice or letter from the Maryland supplier indicating that the Maryland sales tax was paid and the materials were picked up in Maryland by the Taxpayer, and a letter from the California supplier that the materials were returned), then the Department will allow an appropriate credit.
The Taxpayer finally requests that no further audits be made in reference to sales and use tax since he is not a dealer. The Department of Taxation has an obligation to ensure that all revenues properly due the Commonwealth are collected. In fulfilling this obligation, audits of businesses are regularly conducted without regard to whether such businesses are registered retailers. Inasmuch as sellers and purchasers both have sales and use tax obligations, we will continue to conduct audits of a wide range of businesses.
Based on the foregoing, I find no basis for correction of the assessment. If the Taxpayer can provide the Department with the proper documentation in reference to the Maryland and California taxes, the assessment will be adjusted accordingly. The tax, interest, and penalties are now due and payable.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner