Tax Type
Retail Sales and Use Tax
Description
Use tax; Purchases by contractors
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 31, 1988, seeking the correction of an assessment issued in the above referenced case for the period April 1983, through August 1986.
FACTS
******* ("The Taxpayer"), a contractor, is contesting the application of sales and use tax to certain purchases of tangible personal property for use in construction projects within the Commonwealth of Virginia.
DETERMINATION
In general, §58.1-610(A) of the Code of Virginia provides that "any person who contracts...to...perform construction, reconstruction, installation, repair, or any other service with respect to real estate" is deemed to be the taxable user or consumer of any property furnished in connection with the work. As such ultimate user and consumer, the Taxpayer does not collect the sales tax from his customer but instead pays the tax when purchasing the tangible personal property.
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, the Taxpayer must remit the use tax on purchases in the Commonwealth where no sales tax was paid and also "must remit the use tax on any tangible personal property purchased" outside the Commonwealth but consumed within the Commonwealth. Virginia Retail Sales and Use Tax Regulation §630-10-27(A).
The Taxpayer purchased tangible personal property from ********* and *********(two out of state suppliers). If the suppliers were contractors and installed such tangible personal property within the Commonwealth, then the Taxpayer would not be liable for the use tax. The Department as of yet has not received proper documentation concerning these two transactions and will adjust the audit if in fact the suppliers were installing contractors. otherwise, the suppliers will be treated as out of state retailers and the Taxpayer will be liable for use tax on the purchases.
In reference to the Taxpayer's purchases from four vendors ************** the Taxpayer contends that sales tax was paid to these vendors. None of the documents provided to Department indicate that sales tax was paid on transactions involving these vendors. To the contrary, the invoice from indicates "tax exempt." Therefore, I find no basis for adjustment on this issue.
Taxpayer was also held liable for tax on purchases from *********** (a Maryland corporation) that were picked up in Maryland and used in Virginia. The Taxpayer contends that he is not subject to the tax under an exemption certificate issued by the Taxpayer's client (a federal government political subdivision).
§630-10-27(J) of the Virginia Retail Sales and Use Tax Regulations states in part:
-
- Generally, purchases...by contractors in connection with real property construction contracts with the governments of Virginia or the United States or [their] political subdivisions...are subject to the tax on such transactions.
Only in instances where the credit of a governmental entity is bound directly and the contractor has been officially designated as the purchasing agent for such governmental entity will such purchases be deemed exempt from the tax.
- Generally, purchases...by contractors in connection with real property construction contracts with the governments of Virginia or the United States or [their] political subdivisions...are subject to the tax on such transactions.
The Taxpayer had no authority to use exemption certificates of a federal government political subdivision in its purchases unless the Taxpayer was an officially designated purchasing agent of such governmental agency and the credit of such governmental agency was bound. If the Taxpayer meets the above requirements and can provide appropriate documentation, the Department will issue an exemption certificate and adjust the assessment accordingly.
If you wish to submit additional documentation, please furnish this to the Technical Services Section, Virginia Department of Taxation, Post Office Box 6-L, Richmond, Virginia, 23282, within thirty days. Otherwise, I find no basis for adjustment and the assessment will be due and payable at that time.
If you have any further questions, please contact the Department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner