Tax Type
Retail Sales and Use Tax
Description
Application of sales and use taxes; Out-of-state contractor
Topic
Taxability of Persons and Transactions
Date Issued
03-09-1994
March 9, 1994
Re: §58.1-1821 Application: Retail Sales & Use Tax
Dear*****
This will respond to your letter of October 18, 1993 in which you contest a sales and use tax assessment to your company,***************(the "Taxpayer"), for the period July 1990 through April 1993.
FACTS
The Taxpayer, an out-of-state contractor who does work in Virginia, was audited and found liable for his failure to properly remit the tax on purchases and leases of equipment, and purchases of building materials, supplies and tools consumed at Virginia work sites. The only area which the Taxpayer contests, however, is the assessment of the tax on purchases of certain panels from an out-of-state supplier. The Taxpayer maintains that the tax was included in the amount paid to the supplier for the panels. Furthermore, the Taxpayer contends that the department should pursue the supplier for payment of the tax.
DETERMINATION
Virginia Regulation (VR) 630-10-109(A) provides in part that "[t]he use tax applies to the use, consumption or storage of tangible personal property in Virginia when the Virginia sales or use tax is not paid at the time the property is purchased." The courts have held that the legal incidence of the Virginia sales and use tax is on the purchaser. Although a dealer as defined in Va. Code §58.1-612 is legally obligated to collect the tax from the purchaser unless the purchase is exempt from taxation as provided in Va. Code §§58.1-609.1 through 58.1-609.10, the statute makes the tax the legal debt of the purchaser. ( See United States v. Forst, 442 f. Supp. 920 (W.D. Va. 1977), aff'd, 569 F.2d 811 (4th Cir. 1978).
While the Taxpayer's purchase order contained a statement that tax was included in the cost per square foot, it did not specify that this was Virginia sales and use tax. Furthermore, the invoice from the supplier made no reference to the tax. VR 630-10-24 requires that a "dealer must separately state the amount of the tax and add the tax to the sales price or charge." Thus, since no proof has been provided to show that the Taxpayer's supplier collected the tax at the time the property was purchased, the Taxpayer was liable for remitting the tax directly to the department.
Based on the foregoing, I find no basis for correction of the assessment. However, if the Taxpayer can provide documentation showing that the tax on the panels was remitted by its supplier, I will consider revising the assessment accordingly. In this case, the documentation requirement will be met if the Taxpayer provides a letter from the supplier indicating that (i) the Virginia tax was included in the total contract cost, (2) the supplier is registered with Virginia for collection of the tax (letter must include supplier's Virginia registration number), and (3) the tax was in fact paid to Virginia.
This information should be provided within 30 days to the department's Office of Compliance, Audit Review Unit, P. O. Box 615, Richmond, Virginia 23205-0615. If the requested information is not received by the department within this time period, interest on the total outstanding assessment will be accrued. A revised Notice of Assessment then will be sent to the Taxpayer and should be paid within 30 days to avoid the accrual of additional interest and collections activities.
Sincerely,
Danny M. Payne
Acting Tax Commissioner
OTP/7427H
Rulings of the Tax Commissioner