89-237 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Contractor purchases for an out-of-state job

Topic

Taxability of Persons and Transactions

Date Issued

09-11-1989

September 11, 1989

Re: Ruling Request/ Sales and Use Tax

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

This will reply to your letter of July 5, 1989 seeking a ruling on the correct application of the Virginia sales and use tax to the purchase of construction materials for use in real estate construction projects outside Virginia.

FACTS

*********** ("The Taxpayer") is a Virginia based contractor which also contracts to perform alterations to real estate in the District of Columbia. The taxpayer is presently employed by the ***********(Embassy) to perform construction work in the Embassy's buildings in Washington, D.C. The taxpayer requests a determination as to whether construction materials purchased for use in this project are exempt of the Virginia retail sales and use tax.

RULING

§58.1-610 of the Code of Virginia makes construction contractors the taxable user or consumer of all tangible personal property purchased, used, or stored in Virginia in connection with real estate construction contracts. As such, whenever a construction contractor purchases or takes delivery of tangible personal property in Virginia for use in a real estate construction contract, the tax will be due. This includes instances in which the tangible personal property will ultimately be affixed to real estate located outside of Virginia.

An exception to this general rule is set forth in §58.1-608(3)(a) of the Code of Virginia:

- Personal property purchased by a contractor which is used solely in another state or foreign country, which could be purchased by such contractor for such use free from sales tax in such other state or in such foreign country, and which is stored temporarily in Virginia pending shipment to such state or country, shall not be subject to the sales or use tax.

For example, if a state exempts from its sales and use tax materials that will be incorporated into real estate owned by foreign governments, the tax will not apply to any materials purchased or stored in Virginia for ultimate use in the other state. Of course, in the event that a state does not exempt such materials, the purchase, use, or storage of the materials in Virginia will be subject to the tax.

In this instance, the Taxpayer has submitted documentation to the department confirming that the project in question is not an exempt construction project under the District of Columbia Municipal Regulations. The applicable construction materials can not be purchased by the Taxpayer free from the sales tax in the District of Columbia.

Therefore, consistent with the aforementioned statute, the Taxpayer's purchases of construction materials for use in this project are subject to the Virginia retail sales and use tax. The tax must be paid at the time of purchase to all suppliers who are authorized to collect the tax. In instances where the supplier is not authorized to collect the tax or fails to collect the tax, the use tax must be remitted directly to the department.

Inasmuch as the tax in this case is imposed upon the contractor and not directly upon the Embassy, this policy is in no way inconsistent with the provisions of Article 36 of the Vienna Convention on Diplomatic Relations.

I trust this information has answered your questions; however, please contact the department if you need additional information.

Sincerely,

W. H. Forst
Tax Commissioner

Rulings of the Tax Commissioner