Tax Type
Retail Sales and Use Tax
Description
Real Estate company; Purchases and landscaping
Topic
Exemptions
Property Subject to Tax
Date Issued
06-29-1994
June 29, 1994
Re: §58.1-1821 Application: Retail Sales & Use Tax
Dear*********
This will reply to your letter concerning the Sales and Use Tax audit assessment for **********
(the "Taxpayer") for the period December 1, 1986, through December 31, 1989.
FACTS
The Taxpayer, a real estate company, is contesting the assessment on their purchase of flyers, brochures, posters, and signs from an advertising business. They also purchased bathroom fixtures, kitchen and vanity cabinets, and shrubbery from contractors. In obtaining bids from contractors, the Taxpayer's contract stipulated that the quoted price must include taxes. Therefore, if the Taxpayer has a binding contract with contractors stating that the price includes applicable sales tax, then the Taxpayer contends that the legal document should be supportive of their position they have paid the tax on such transactions.
DETERMINATION
Advertising
Advertising
Subdivision 5 of Va. Code §58.1-609.6, copy enclosed, exempts from taxation charges for "advertising," which is as defined in Va. Code §58.1-602, copy enclosed, as:
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- [T]he planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting or other media, including, without limitation, the providing of concept, writing, graphic design, mechanical art, photography and production supervision.
- [T]he planning, creating, or placing of advertising in newspapers, magazines, billboards, broadcasting or other media, including, without limitation, the providing of concept, writing, graphic design, mechanical art, photography and production supervision.
In this instance, brochures, flyers, posters, and signs that are created by the advertising business as a result of advertising services are exempt from the tax. However, reprints of brochures and flyers, directional signs, entrance signs, and similar items are considered the sale of tangible personal property instead of the provision of advertising, as defined above. Therefore, charges for the sale of such items are taxable. To the extent that brochures, flyers, posters, and signs constituted advertising, they_ will be removed from the audit.
Virginia Regulation (VR) 630-10-27 provides that a contractor is deemed a user and consumer of tangible personal property that is incorporated into real estate when such property loses its identity as tangible personal property and becomes real property. Therefore, a contractor must pay the tax on the purchase of such tangible personal property.
From information which the Taxpayer provided to a member of my staff, the installation of kitchen and vanity cabinets and the bathroom fixtures were installed into realty by a contractor. Therefore, in that the contractor would have been liable for paying the tax on the purchase of items that were incorporated into realty, these items will be removed from the audit.
Shrubbery
VR 630-10-40, copy enclosed, provides that:
-
- When a nurseryman, florist, or other person makes retail sales of shrubbery and similar items, and as part of the transaction agrees to transplant them on the land of the purchaser for a lump sum, the tax applies to the total charge. The tax does not apply to the charge for transplanting if the charge is separately stated on the invoice. (Emphasis added.)
- When a nurseryman, florist, or other person makes retail sales of shrubbery and similar items, and as part of the transaction agrees to transplant them on the land of the purchaser for a lump sum, the tax applies to the total charge. The tax does not apply to the charge for transplanting if the charge is separately stated on the invoice. (Emphasis added.)
The tax levied by this chapter shall be paid by the dealer, but the dealer shall separately state the amount of the tax and add such tax to the sales price or charge. (Emphasis added.)
As a result, a person selling and transplanting shrubbery must charge the tax on the sales price, as well as separately state the amount of the tax on the sales invoice. Labor charges that are not separately stated on the sales invoice are also subject to the tax. If the Taxpayer can provide documentation to verify labor charges to transplant the shrubbery, such charges will be removed from the audit.
The****** District Office will be contacting the Taxpayer within the next thirty days concerning scheduling a_ meeting to obtain the information needed to resolve these issues.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/4836N
Rulings of the Tax Commissioner