Tax Type
Retail Sales and Use Tax
Description
Fabrication of concrete structures
Topic
Taxability of Persons and Transactions
Date Issued
07-06-1988
July 6, 1988
Re: §58.1-1821 Application/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 October 1984, through November 1986.
FACTS
*********** ("The Taxpayer"), is engaged in the fabrication of concrete structures both for its own use in real estate construction projects and for sale to customers. The Taxpayer is contesting the application of the tax to purchases of materials used, consumed, and sold within the Commonwealth.
DETERMINATION
§630-10-27(E) of the Virginia Retail Sales and Use Tax Regulations provides that "[a]ny person who is principally [greater than 50%] fabricating tangible personal property for his own use and consumption in real property construction contracts shall apply the tax" as if he were a contractor under Virginia Code §58.1-610(A). As such, the Taxpayer performing the work does not collect the sales tax from his customer but instead pays the tax when purchasing the raw materials used in making the precast concrete structures.
In accord with Subsection B of 58.1-610 of the Code of Virginia, §58.1-604 of the Code imposes a complementary use tax "upon the use or consumption of tangible personal property in this Commonwealth" when the sales tax is not paid at the time the property is purchased. Therefore, if the Taxpayer is deemed to be a contractor, he "must remit the use tax on any tangible personal property purchased" outside the Commonwealth but consumed within the Commonwealth. Regulation §630-10-27(A).
If the Taxpayer principally (greater than 50% of the time) fabricates the precast concrete structures for resale "to customers, including contractors, for use or consumption by them, [then he] must add the sales tax to the sales price and collect it from the customer for payment to the state. In addition, the fabricator will be liable for use tax based upon the fabricated cost of the property withdrawn from inventory for use in a construction contract. Virginia Retail Sales and Use Tax Regulation §630-10-27(C)
The Taxpayer contends that he principally is fabricating and installing precast concrete structures and should be treated as a contractor instead of a retailer. The Field Services Division will be contacting the Taxpayer for verification of business activities conducted. If it is determined that the Taxpayer is principally fabricating tangible personal property for its own use or consumption, the audit will be adjusted accordingly.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner