Tax Type
Retail Sales and Use Tax
Description
Remittance of tax; Air conditioning and heating equipment
Topic
Returns/Payments/Records
Date Issued
05-04-1993
May 4, 1993
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear*************
This will reply to your letter of February 17, 1992 in which you seek correction of a retail sales and use tax assessment on behalf of your client, **********(the "Taxpayer").
FACTS
The Taxpayer is an out-of-state corporation engaged in the sale and installation of air conditioning and heating equipment. The Taxpayer entered into a contract to sell air conditioning equipment to a company with a division located in Virginia; the contract included charges for the equipment, labor, freight, engineering and Virginia sales tax. An additional amount was subsequently included in the contract for additional equipment and freight. January 1988 and March 1988, the purchaser remitted to the Taxpayer the total contract price less******claiming that amount represented the value of defective equipment.
Following an audit by the department, it was determined that the Taxpayer failed to remit sales tax on the contract and an assessment was issued for tax, interest and penalty. The Taxpayer believes it did not have sufficient nexus with Virginia and, therefore, was not required to collect sales tax. Furthermore, it claims that the invoices issued to the purchaser did not separately state any sales tax. The Taxpayer has remitted*******to the department, which it claims is the excess of the amount collected from the purchaser over the purchase price of the contract, and contends that it owes no additional tax.
DETERMINATION
Under Va. Code §58.1-612, the sales tax is collectible from all persons who are dealers. That same section defines the term "dealer" and includes every person who "sells at retail, or who offers to sell at retail, or who has in his possession for sale at retail, or for use, consumption, or distribution, or for storage to be used or consumed in this Commonwealth, tangible personal property." The Taxpayer clearly qualifies as a "dealer" under Va. Code §58.1-612.
You contend that the Taxpayer does not conduct sufficient activity in Virginia to require it to register to collect the tax. However, the Taxpayer solicited business in the Commonwealth through its employees. This is evidenced by the purchase order, which originated in Virginia; in addition, the equipment was installed in Virginia. The fact that price quotations were directed to offices of the purchaser located outside Virginia does not alter the conclusion that the Taxpayer solicited business in Virginia. Consequently, the Taxpayer is deemed to have sufficient activity within Virginia to require registration to collect Virginia sales tax.
In the present case, the Taxpayer entered into a contract with the purchaser in September of 1987; the Taxpayer permitted the purchaser to make installment payments. According to 1979 Retail Sales and Use Tax Regulation §1-28 (copy enclosed), any person making installment sales "must report the total selling price and pay the applicable tax for the taxable period in which the contract for sale is entered into." The tax was due on the 20th day following the taxable period, or October 20, 1987, regardless of the fact that the sales tax was not separately stated on the installment invoices. The Taxpayer failed to timely remit the tax.
Even if the department were to accept your argument that the Taxpayer did not have sufficient activity in Virginia to require collection of the tax, Va. Code §58.1-625 requires a dealer collecting sales or use tax on transactions exempt or not taxable to remit to the department the erroneously collected tax. Under the terms of the contract, the total purchase price included an amount for Virginia sales tax. The Taxpayer collected the entire purchase price, less the********* the purchaser withheld for defective equipment, in six installments, with the last installment being paid in March of 1988. The total amount of the six invoices equalled the total purchase price, including the Virginia sales tax. Therefore, a portion of each installment must have included the tax. The fact that the invoices did not separately
state the amount of sales tax does not negate the Taxpayer's responsibility to remit the collected tax. The Taxpayer cannot collect the entire contract purchase price, including Virginia sales tax, and subsequently attribute the amount withheld by the purchaser to sales tax. It is also worth noting that the Taxpayer made no effort to remit any sales tax to the department until November of 1991, when it was audited.
Based on the above, the assessment is correct as made. However, the assessment will be revised to reflect the amount previously remitted by the Taxpayer and the amount remitted directly to the department by the purchaser (4.5% of the total amount billed on the final installment). You will shortly receive an updated bill with interest accrued to date. The bill should be paid within 30 days to avoid the accrual of additional interest.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6000F
Rulings of the Tax Commissioner