Tax Type
Retail Sales and Use Tax
Description
Signs
Topic
Taxability of Persons and Transactions
Date Issued
03-02-1988
March 2, 1988
Re: §58.1-1821 Application/Sales and Use Tax
Dear****************
This will reply to your letter of September 30, 1987 in which you requested that your letter of June 18, 1987 be considered as a formal application for the correction of sales and use tax assessed to as the result of an audit for the period of March 1, 1980 through December 31, 1985.
FACTS
*********** (taxpayer) was assessed use tax on its purchases of signs from one of its vendors, Taxpayer contends that these signs are of a reasonably permanent nature and as such become a part of realty. Taxpayer also maintains that the vendor is not a retailer, but a contractor with respect to these signs in accordance with Virginia Regulation 630-10-100. Since the vendor is complying with the regulation and pays sales tax at the point materials are purchased, taxpayer contests the assessment of use tax on its purchases of these signs.
DETERMINATION
In determining whether an article used in connection with realty is to be considered real or personal property, the intention of the party with respect to the item in question is the paramount and controlling consideration (see Transcontinental Gas Pipe Line Corp. v. Prince William County, 210 Va. 550, 172 S.E. 2d 757 (1970)). While these signs may be of a more permanent nature than "For Sale" signs, it is my understanding that the signs are moved from subdivision to subdivision as needed, altered with different messages, and do not remain permanently affixed at one location for any lengthy period of time. Since the intent of the taxpayer is not to leave the signs permanently affixed where implanted, the signs are tangible personal property.
Virginia Regulation 630-10-100 states that "[a]ny person who constructs and installs signs, billboards or similar items which, upon installation, become incorporated into realty is a contractor with respect to such items. No tax is applicable to the charge for constructing and installing a sign which becomes attached to realty." However, these signs do not become a part of realty and as stipulated in VR 630-10-100, "[t]he tax applies to the charge for the manufacture or fabrication of signs, outdoor boards and similar items."
The vendor is thus considered a retailer with respect to these signs and should have charged taxpayer the applicable tax on such sales of tangible personal property. The vendor may purchase under a resale exemption certificate, Form ST-10, any materials used for construction of tangible personal property that will be sold at retail. Furthermore, your vendor may seek a refund of the tax paid on materials used in the production of signs sold to the taxpayer.
When the Virginia sales tax is not paid at the time tangible personal property is purchased, the use tax applies to the use, consumption or storage of the property as set forth in VR 630-10-109. Consequently, taxpayer is liable for the use tax on its purchases of the signs since the vendor did not charge the applicable tax at the time the signs were sold.
Therefore, based upon the information before me, I find no basis for correcting the assessment, which is now due and payable. The department will, however, contact the taxpayer's vendor to explain the proper application of the tax.
If you have any further questions on the issues raised in this letter, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner