Tax Type
Retail Sales and Use Tax
Description
Construction; Signs
Topic
Taxability of Persons and Transactions
Date Issued
11-14-1994
November 14, 1994
Re: Request for Ruling: Retail Sales and Use Tax
Dear*****
This will reply to your letter of December 2, 1993 in which you request a ruling on the application of the sales and use tax to the production and installation of signs by********** (the "Taxpayer").
FACTS
The Taxpayer is a manufacturer of sign products and 90% of the Taxpayer's business is attributable to the production and installation of signs which become real property upon installation. The other 10% of the business activity is attributable to retail sales of sign products. In the past, the Taxpayer has acted as a retailer and charged sales tax to its customers computed on the sales price of its signs excluding separately stated installation labor charges. However, the Taxpayer has been audited and classified as a contractor regarding signs incorporated into realty based on P.D. 92-93 (615192) and P.D. 88-32 (312188). The Taxpayer requests verification of its contractor status as it sees a contradiction between the two rulings.
Additionally, the Taxpayer inquires about the tax application to purchases of materials used in the maintenance of real property signs and seeks clarification on whether the tax treatment of sign painting also applies to the application of pressure sensitive vinyl to vehicles.
RULING
Virginia Regulation (VR) 630-10-100, copy enclosed, sets forth the policy regarding sign manufacturers and sign painting. The regulation distinguishes between producers of signs which remain tangible personal property and signs which become real property upon installation and the tax treatment thereof. The regulation also discusses sign painting and sign maintenance and repair.
P.D. 92-93 considers a taxpayer who manufactures and installs signs which become real property upon installation. Such signs are mounted to the exterior of buildings or mounted on pylons or monuments embedded in the ground. The taxpayer was deemed a contractor with respect to such signs. P.D. 88-32 deals with a purchaser of signs which did not become real property upon installation, but instead maintained their status as tangible personal property. The Tax Commissioner ruled that the use tax applied to the taxpayer's purchases of the signs because the vendor failed to charge the taxpayer the applicable sales tax upon purchase. As such, the rulings do not contradict one another, but instead illustrate the application of the tax from both a purchaser and seller perspective in relation to the status of the signs upon installation.
In the present case, the Taxpayer acts in a dual role as contractor/retailer. As a contractor, the Taxpayer is required to pay the tax on all property used in the construction and installation of real property signs as provided under VR 630-10-100. The Taxpayer will continue to charge tax on the retail sales of signs which retain their tangible personal property status.
When the Taxpayer provides maintenance to these signs, it continues to act as a contractor and must pay the tax on all property used in the maintenance work as stated in section D of the regulation.
On the issue of the pressure sensitive vinyl, I am enclosing P.D. 91-19 (2129191). The ruling deals with whether the application of plastic/vinyl trademark decals to equipment should be treated in the same manner as painting on the trademark which is deemed a nontaxable service. It was determined that the sale of decals constituted the exchange of tangible personal property and therefore was held taxable. Therefore, the Taxpayer must collect the tax on its sales of pressure sensitive vinyl. The installation labor charge is exempt from the tax provided it is separately stated on the invoice.
I hope the foregoing has responded to your inquiry. Should you need additional assistance, please do not hesitate to contact the department.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/7540J
Rulings of the Tax Commissioner