Tax Type
Retail Sales and Use Tax
Description
Telecommunication system; Cable used in installation
Topic
Exemptions
Property Subject to Tax
Date Issued
03-27-1991
March 27, 1991
Re: 58.1-1821 Application: Sales and Use Tax
Dear****************
This will reply to your letter of July 2, 1990 in which you seek correction of a sales and use tax assessment for ***************** (the "Taxpayer").
FACTS
The Taxpayer is in the business of selling and installing telecommunication systems. An audit of the Taxpayer for the period March 1, 1986 through February 28, 1989 produced assessments for its failure to remit the sales and use tax on purchases of cable used to connect the components of communication systems sold to customers.
The Taxpayer contends that the cable used in the installation of telephone and other telecommunication systems are purchases for resale and may be purchased tax exempt. The Taxpayer invoices its customers a total charge for a system, which includes equipment, installation materials and labor. The Taxpayer then computes the sales tax on the total charge. The Taxpayer is contesting the department's assessment of sales and use tax on the purchase of cable used in the installation of telecommunication systems.
DETERMINATION
Virginia Retail Sales and Use Tax Regulation (VR) 630-10-102.2, (copy enclosed), provides that, "[t]he tax applies to the total charge for the sale or lease of intercom, interconnect and telephone systems. Separately stated charges for the installation of such systems are not subject to the tax." (Emphasis added).
This regulation continues, "[p]ersons engaged in the sale or lease of such systems must pay the tax on all equipment and supplies used in installation, including but not limited to, equipment and tools and wiring and other similar items." (Emphasis added).
As a seller and installer of telecommunication equipment, the Taxpayer clearly falls within the scope of the regulation quoted above. Accordingly, the Taxpayer is liable for the sales and use tax on all equipment and supplies, including wire and cable, used in the installation of telecommunication systems. For this reason, I find no basis for the adjustment of the audit liability.
If you should have any further questions, please feel free to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner