Tax Type
Retail Sales and Use Tax
Description
Out-of-state contractor; Materials shipped to Virginia job site; Sales tax paid to another state
Topic
Property Subject to Tax
Date Issued
06-23-1994
June 23, 1994
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear*********
This will reply to your letter of February 19, 1993 in which you seek correction of a sales and use tax assessment for ***************(the "Taxpayer") for the period from May 1989 through April 1992.
FACTS
The Taxpayer is a general contractor located in another state. The Taxpayer has performed construction contracts in Virginia, and has had items it purchased from suppliers shipped into Virginia for use in those contracts.
You are contesting an assessment of use tax on the Taxpayer's purchases of tangible personal property shipped into Virginia, claiming that the Taxpayer paid taxes on its purchases to its home state. You also assert that the suppliers have corrected their reporting and paid the applicable tax to Virginia and believe that the suppliers should be responsible for the taxes they failed to correctly charge.
DETERMINATION
Va. Code § 58.1-610(A) provides that any person who contracts to perform construction or any other service with respect to real estate is deemed to be the taxable user or consumer of any property furnished in connection with the work. As the ultimate user and consumer, the Taxpayer pays the tax when purchasing the tangible personal property. The Taxpayer must remit the use tax on any tangible personal property purchased outside Virginia but used in construction contracts located in Virginia.
You contend that the Taxpayer paid sales tax to its home state. Subsequently, the Taxpayer contacted its suppliers, who it claims have remitted the applicable tax to Virginia. However, no documentation has been submitted to support your position. Therefore, the burden of proving that the assessment is erroneous, as required under Va. Code§ 58.1-1821, has not been met. Therefore, no basis exists for revising the audit.
Va. Code §58.1-611 provides a credit against Virginia's sales and use tax equal to the amount of the tax paid by the purchaser to another state by reason of imposition of a similar tax on the purchase or use of property. However, Virginia Regulation (VR) 630-10-29 makes is clear that the credit is not available to tax erroneously charged or incorrectly paid to another state. The regulation provides an example directly on point with the Taxpayer's situation - "if a person purchases and takes delivery in Virginia of tangible personal property purchased from an out-of-state dealer who incorrectly charges out-of-state tax, no credit is available. The purchaser must apply to the out-of-state seller for refund." In this case, no credit is available for materials purchased outside Virginia and shipped directly to Virginia job sites, as there was no taxable use of the property by the Taxpayer in its home state. Absent some taxable use, generally there would be no tax liability to the home state or the state in which the seller of the property was located.
Accordingly, there is no basis to revise the audit or allow a credit against the tax assessed. However, the Taxpayer will be given the opportunity to provide documentation showing that the Virginia tax on the purchases was actually remitted by the suppliers to the department. Proof that the tax was charged and paid by each supplier and the Virginia account number under which it was paid and where it was paid must be furnished. The documentation from each supplier must be on the supplier's company letterhead and signed by an officer of the company.
It should be noted that for all periods following the audit period at issue, the Taxpayer must pay Virginia tax on purchases of tangible personal property for use in construction projects in Virginia. The Taxpayer must either pay the Virginia tax to its suppliers (if the suppliers are registered to collect Virginia sales and use tax) or remit the use tax directly to the department.
Please submit the necessary information to the department's ***** District Office, *****************. If the requested information is not received within 45 days, the information on which the assessment was originally based will be presumed to be the best available and the assessment will be upheld.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/6847F
Rulings of the Tax Commissioner