Tax Type
Retail Sales and Use Tax
Description
Property for Incorporation into Out-of-State Tax-Exempt Realty
Topic
Taxability of Persons and Transactions
Date Issued
05-31-1991
May 31, 1991
Re: Request for Ruling: Retail Sales and Use Tax
Dear**************
This will reply to your letter dated March 29, 1991 in which you request a ruling concerning the application of the Virginia retail sales and use tax to transactions involving the************* (the "Taxpayer").
FACTS
The Taxpayer, an out-of-state contractor, will have tunnel tube structures fabricated in Florida and delivered to the Taxpayer in Virginia. The Taxpayer will perform various operations (known as "outfitting") on the tubes in the form of concrete, reinforcement steel, electrical conduit, and mechanical piping installations at a leased facility, utilizing materials and labor primarily available in the Norfolk area. Upon completing the outfitting of each tube, the tubes will be delivered by the Taxpayer to Massachusetts. They will then be incorporated by the Taxpayer into a Massachusetts Department of Public Works project, a federally aided project which is exempt from Massachusetts sales tax.
The Taxpayer requests a ruling whether it will be liable for Virginia sales tax on the full value of the tubes upon their delivery to Virginia. The Taxpayer further requests whether it will be exempt from the tax as a fabricator/contractor performing work on tangible personal property which will be incorporated into a tax-exempt project outside Virginia.
RULING
Va. Code §58.1-608(3)(a) provides an exemption from the tax for:
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- Personal property purchased by a contractor which is used solely in another state or in a 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.
This provision exempts from the tax purchases of construction materials by a contractor which are temporarily in Virginia pursuant to incorporation outside of Virginia in an exempt construction project. The exemption is restricted to construction materials that are to be incorporated into real property construction and could be purchased tax free by the contractor in the other state or nation. The tax applies, however, to property that is not incorporated into realty, such as equipment, tools, supplies, etc., used in the performance of the construction project.
Under current Massachusetts law (Mass. Gen. Law Chapter 64H, §6), all materials and supplies consumed, employed, or expended in the construction or repair of any building structure, bridge or other public works owned by or held in trust for the benefit of the Commonwealth of Massachusetts, as well as those items physically incorporated therein are exempt from the tax. Since the Taxpayer could purchase the materials tax free in another state, the Taxpayer will be exempt from the tax on the value of the tubes upon their delivery into Virginia and any materials purchased in Virginia that are to be incorporated into the exempt project in Massachusetts. The ultimate delivery of the tubes outside the state will also be exempt from the tax. As provided above, the purchase of equipment, tools, supplies, etc. which will not be incorporated into realty will be subject to the tax.
Enclosed are copies of Form ST-11A which the Taxpayer must present to its vendors in order to purchase items exempt of the tax in Virginia.
I trust this will answer the questions posed in your letter. Please feel free to contact the department if you need further clarification or other questions arise.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner