89-221 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Installation charges; Sales price

Topic

Exemptions

Taxability of Persons and Transactions

Date Issued

08-24-1989

August 24, 1989

Re: Ruling Request/Sales and Use Tax

Dear**********************

This is in reply to your letter of July 12, 1989 seeking clarification of §630-10-27(H) of the Virginia Retail Sales and Use Tax Regulations dealing with installation charges.

As I understand, your client sells and installs real and tangible personal property. Your client may also sell tangible personal property which it does not install but is installed by the customer. Your letter outlines four different methods which your client may use to bill installation. I will address each of these situations separately below.

- Method 1
  
  Under this method the invoice is printed with a specific dollar amount being shown as the installation charge. The fact that the installation charge in this situation can be given a definitive dollar amount, we would consider this to be "separately stated" and not subject to the sales and use tax.
  
  Method 2
  
  In this situation your client's invoice would include a standardized notation that 20% of the total invoice amount is for installation charges. Here again the fact that for each individual invoice the installation charge can be computed as a definitive amount, we would consider this a "separately stated" installation charge and not subject to the sales and use tax.

- Method 3
  
  This situation is similar to method in the fact that if your client does the installation, 20% of the invoice amount is charged to installation. However, if your client's customer elects to install the tangible personal property himself, a 20% discount would be allowed from the total invoice amount. The same reasoning cited for method 2 above would also apply to this situation. The fact that a definitive installation figure can be obtained would serve to exclude the installation charge from the sales and use tax.
  
  Method 4
  
  The invoicing procedures as described in this method would not qualify the installation charges as tax exempt. In order to be exempt, the customers invoice copy must show the installation charges as being "separately stated". The situation which you describe shows "separately stated" installation charges on the suppliers invoice but the customer's invoice shows only a lump sum charge for the total job.

It should also be noted that §630-10-27(H) of the regulations states that retailers are the users or consumers of all supplies and materials used in the installation of tangible personal property.

If you should have any further questions, please feel free to contact this department.

Sincerely,

W. H. Forst
Tax Commissioner

Rulings of the Tax Commissioner