Tax Type
Retail Sales and Use Tax
Description
Sales for Resale; Purchases On Behalf of Federal Government
Topic
Taxability of Persons and Transactions
Date Issued
03-02-1992
March 2, 1992
Re: Request for Ruling: Retail Sales & Use Tax
Dear********************
This will reply to your letter of October 15, 1991 in which you seek a tax exemption certificate on computer equipment that**************(the "Taxpayer") plans to purchase on behalf of the U. S. government.
FACTS
The Taxpayer has contracted with the federal government to provide users requirements analysis, configuration analysis, assessment of qualified hardware vendors, the selection of the best qualified vendor, the procurement of the equipment, the validation of the installed system, and the training of government staff. It seeks to purchase the equipment exempt from the tax.
RULING
Generally, persons who contract with the federal government to provide services and in connection with those services provide tangible personal property are deemed to be the users and consumers of the tangible personal property and must pay the tax on their purchases. See Virginia Regulations (VR) 630-10-45 and 630-10-27, copies enclosed.
However, as noted in the enclosed prior ruling of the Commissioner, P.D. 88-159 (6/23/88), a tax liability is not incurred by persons who contract with the federal government for the sale of tangible personal property. In such cases the contractor may purchase property exempt from the tax for resale to the federal government. In addition, the subsequent sale to the federal government is exempt from the tax under Va. Code §58.1-608(A)(1)(h).
In the instant case, the Taxpayer has contracted with the federal government for the sale of tangible personal property rather than for the provision of a service even though it is obligated to provide various services in connection with the sale of the computer system. Therefore, the Taxpayer may purchase the computer equipment exempt from the tax using Form ST-10, Resale Exemption Certificate, copy enclosed, and may resell it to the federal agency also exempt from the tax provided the sale will be pursuant to an official purchase order and payment will be made with government funds.
The enclosed letter explains in greater detail the tax treatment of various purchases which may be made by the Taxpayer in connection with its contract.
The tax treatment of tangible personal property provided in connection with future contracts within which you may engage with the federal government will depend on whether the contract is for the sale of tangible personal property or for the provision of some services.
If you have any further questions regarding this matter, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
TPD/5685H
Rulings of the Tax Commissioner