Tax Type
Retail Sales and Use Tax
Description
Construction; Installation of bank equipment
Topic
Taxability of Persons and Transactions
Date Issued
06-28-1994
June 28, 1994
Re: Request for Ruling: Retail Sales and Use Tax
Dear**********
This will reply to your letter of June 11, 1993 in which you seek a ruling regarding the application of the sales and use tax to materials and equipment sold and installed by your client, *********** (the "Taxpayer").
FACTS
The Taxpayer sells and installs bank equipment. The materials and equipment are shipped into Virginia, temporarily stored in Virginia and delivered to job sites outside of Virginia. In the past, the Taxpayer has charged and remitted sales tax to the state where the bank equipment was installed. Following a sales tax audit, the Taxpayer was advised that it needed to change its reporting procedures, based on the classification of the materials and equipment (real property or tangible personal property).
You seek written confirmation regarding the classification of certain materials and equipment as either real property or tangible personal property.
RULING
In determining whether equipment and materials remain tangible personal property or become part of the real estate, the Virginia Supreme Court has ruled:
-
- Three general tests are applied in order to determine whether an item of personal property placed upon realty becomes itself realty. They are: (1) annexation of the property to realty, (2) adaptation to the use or purpose to which that part of the realty with which the property is connected is appropriated, and (3) the intention of the parties. The intention of the party making the annexation is the chief test to be considered..."
Transcontinental Gas Pipe Line Corporation v. Prince William County 210 Va. 550 (1970).
Based on the information provided, and in accordance with established department policy, the following would become realty upon installation:
Vault doors and fire doors
Night depository assemblies
Tellerveyors/autoveyors
Concrete panel vaults
Drive-up windows
Pneumatic drive-up systems
The following items would not be incorporated into real estate and, therefore, would remain tangible personal property:
Safe deposit boxes Vault lockers
Undercounter teller stations Drive-up undercounter
Bullet resistive teller station Storage safes
You also ask about the application of the tax to a situation in which the Taxpayer invoices a job which is considered 80% real property and 20% tangible personal property. You ask if the Taxpayer must segregate the invoice between real property and tangible personal property or can the job be considered real property.
Where a contract is primarily for realty, the Taxpayer should remit the use tax on all property purchased under the contract. If the use tax is remitted, the Taxpayer is not required to invoice the customer for the tangible personal property and charge sales tax.
If you have any other questions regarding this matter, please contact the department.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/7070F
Rulings of the Tax Commissioner