Tax Type
Retail Sales and Use Tax
Description
Flooring materials furnished to contractor; Use tax
Topic
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
01-07-1994
January 7, 1994
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear******
This will reply to your letter, concerning the sales and use tax assessment of **********( the "Taxpayer") for the period of January 1, 1988 through January 31, 1990.
FACTS
In February 1990, the Taxpayer was purchased by **********(the "Parent"), who is now liable for the audit assessment. The Taxpayer contracted with a general contractor to supply and install flooring into its facility. Due to the contractor's size and credit rating, the Taxpayer was required to be the purchase "middleman" with the flooring company in order to secure delivery of the flooring materials. When purchasing the materials, the Taxpayer did not pay the tax since the contractor was required by contract to pay the tax. The Taxpayer contests the audit assessment of tax on its purchase of the flooring materials since the tax should have been paid by the contractor. Further, the Taxpayer contends that if it pays the tax assessed in the audit, the tax would have been paid twice.
DETERMINATION
Va. Code §58.1-604, copy enclosed, imposes the use tax on the purchase of tangible personal property used or consumed in Virginia. In such cases, the purchaser must remit the tax directly to the department. The term "use" is defined in Va. Code §58.1-602, copy enclosed, as "the exercise of any right or power over tangible personal property incident to the ownership thereof, except that it does not include the sale at retail of that property in the regular course of business."
Virginia Regulation (VR) 630-10-109, copy enclosed, further states,
-
- The use tax applies to the use, consumption or storage of tangible personal property in Virginia when Virginia sales or use tax is not paid at the time the property is purchased.
Therefore, if the purchaser exercises any right over, consumes, or stores the property which is not merchandise for resale, it will be subject to the use tax if the tax has not been collected by the seller. In that the Taxpayer made use of the flooring materials upon purchase, the Taxpayer was required to pay use tax on these materials if the tax was not charged by the seller even if the materials were subsequently furnished to the contractor for installation in the facility. However, if the contractor honored the contract and has paid tax on the materials, the Taxpayer would not be subject to the tax.
Accordingly, if the Taxpayer can furnish documentation provided by the contractor substantiating that the use tax was paid to the department, the flooring material purchases will be removed from the audit. This documentation should be furnished to the ********* Virginia District Office for review within 30 days from the date of this letter. If revisions are warranted, a corrected Notice of Assessment will be issued, which will be immediately due and payable. If this documentation is not furnished within 30 days, the entire assessment will be considered due, and the collection process will resume.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6246N
Rulings of the Tax Commissioner