Tax Type
Retail Sales and Use Tax
Description
Fabrication; Subcontractor
Topic
Taxability of Persons and Transactions
Date Issued
11-27-1991
November 27, 1991
Re: §58.1-1821 Application: Retail Sales & Use Tax
Dear*********************
This will reply to your letter of June 25, 1991 in which you seek correction of a sales and use tax assessment to ********** (the "Taxpayer") for the period May 1985 through November 1990.
FACTS
The Taxpayer, a roofing company, purchased materials for use in real property construction contracts and appropriately paid the sales tax on such at the time of purchase. The materials were later given to subcontractors for fabrication and the charges for such fabrication were held taxable and included in the assessment by the auditor. The Taxpayer contests the application of the tax to fabrication labor since the tax was paid on the original purchase of the materials.
DETERMINATION
Virginia Regulation (VR) 630-10-37, copy enclosed, in accord with Va. Code §58.1-603 and the definitions of "sale at retail" and "sale" as set forth in Va. Code §58.1-602, provides that:
-
- An operation which changes the form or state of tangible personal property is fabrication...[A] person regularly engaged in the fabrication of tangible personal property for sale at retail must collect and pay the tax on the sales price of the property...The tax applies to the total charge for the fabrication of tangible personal property on a special order for a consideration, including labor, even if charges for labor are separately stated. The tax applies to the charges for the fabrication of tangible personal property for users or consumers who furnish, either directly or indirectly, the materials used in the fabrication work. (Emphasis added)
In the instant case, while the Taxpayer paid the sales tax on the cost of materials later given to subcontractors for fabrication, pursuant to the above regulation and Code cites, it was also required to pay the sales tax on fabrication labor.
Accordingly, the assessment was correct and is now due and payable. A revised notice of assessment with interest accrued to date will be mailed to you shortly.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/5690H
Rulings of the Tax Commissioner