Tax Type
Retail Sales and Use Tax
Description
Fence fabrication and installation
Topic
Exemptions
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
12-20-1991
December 20, 1991
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear********************
This will reply to our letter of June 25, 1991 in which you seek correction of an assessment for the period June 1987 through April 1990 for*************(the Taxpayer).
FACTS
The Taxpayer operates a fence fabrication and installation business. The Taxpayer was assessed tax for untaxed sales, purchases and fixed assets. The Taxpayer provided materials and performed the fabrication and installation for their customers but did not separate the installation charge on the invoice to the customer. The Taxpayer would combine the materials cost with a profit mark-up to arrive at the "material cost" and compute the tax on this amount. The Taxpayer would then add the "material cost" to the installation/fabrication charge to produce the total cost listed on the invoice without separately stating the installation charge. The Taxpayer would separate the installation charge on its own internal copy of the invoice and remit the tax on the "material cost" to the department.
This is the fourth audit of the Taxpayer. This same invoice treatment had been identified by the department in a previous audit and the Taxpayer had been notified by letter dated February 4, 1986 as to the proper method for collecting tax on installation charges. The Taxpayer contests a portion of the untaxed sales attributable to the fabrication and installation charges.
DETERMINATION
Va. Code §58.1-603 imposes a sales tax "[u]pon every person who engages in the business of selling at retail or distributing tangible personal property in this Commonwealth..." Va. Code §58.1-610(D) provides in pertinent part that "[A]ny person selling fences...shall be deemed to be a retailer of such items and not a using or consuming contractor with respect to them, whether he sells to and installs such items for contractors or other customers and whether or not such retailer fabricates such items." Further, Virginia Regulation (VR) 630-10-27(H) provides that "[A]ny person who sells tangible personal property at retail and installs such property as part of or incidental to the sale is a retailer and is required to add the sales tax to the sales price. The tax does not apply to installation charges when separately stated. If the installation charge is not separately stated, the tax must be computed on the total charge." Based on the facts presented, the Taxpayer is a retailer and must collect sales tax on the sales price of the tangible personal property sold. The tax will apply to the total amount of the invoice unless the installation is separately stated on the customer's invoice.
In the present case, the Taxpayer only collected and remitted the tax on the "material cost" even though the tax should have been collected on the total amount. To compute the assessment, the Taxpayer was given credit for the amounts remitted on the materials cost, therefore, the amount assessed is the difference between the amount of the tax due on the total cost and the smaller amount of tax on the "material cost" remitted. The assessment is therefore, due and payable.
To avoid this situation in the future, the Taxpayer must separately list installation charges on its customers' invoices.
If you have any questions, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/5298I
Rulings of the Tax Commissioner