Tax Type
Retail Sales and Use Tax
Description
Interior decorator; Fabrication labor
Topic
Taxability of Persons and Transactions
Date Issued
10-23-1995
October 23, 1995
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear****************
This will reply to your letter in which you seek correction of a sales and use tax assessment to *********(the "Taxpayer") for the period September 1991 through August 1994.
FACTS
The Taxpayer is engaged in the business of interior design and decorating. As a result of the department's audit, an assessment was made for untaxed fabrication labor on bedspreads, throw pillows, window treatments, etc. The Taxpayer protests the assessment because of lack of sales and use tax information prior to the audit.
DETERMINATION
In regard to the availability of information, the department employs various methods to disseminate information concerning the sales and use tax and other taxes it administers. Under Code of Virginia § 58.1-204, the department is required to publish regulations and written rulings or other interpretations of Virginia law which are of interest to taxpayers and practitioners. The department periodically issues tax bulletins and also has available, free to the general public, copies of rulings and public documents to clarify areas of concern or interest. The department also has several district offices located throughout the Commonwealth to assist taxpayers and provide necessary information.
Although I am sympathetic to the plight of small businesses, it is likely that the Taxpayer received a set of regulations upon becoming registered for the tax in April 1977. Additionally, all registered dealers received a copy of the 1979 revised version of the regulations. Even in the event that the Taxpayer did not receive these copies, the department's policy should be known within the interior decorating profession as it has been set out in Virginia Regulation (VR) 630-10-37 for many years. A comparison of the appropriate sections and then regulations is set out below.
The 1969 version of VR § 1-37 provides that "[a]n operation that changes the form or state of the property is one of "fabrication"...[and] "[t]he tax applies to the total charge for the fabrication of tangible personal property for a consideration." The 1979 revised version of VR § 1-37 provides that "[a]n operation that changes the form or state of tangible personal property is "fabrication." This section further provides "[t]he tax applies to the charges for the fabrication of tangible personal property on a special order for a consideration, including labor, even if charges are separately stated." Similar guidance is also provided in the 1985 revised version of VR 630-10-37.
As you can see, this regulation has changed very little from the 1969 regulations. The department has consistently held that fabrication labor is taxable. It is clear from the above cited regulations that the auditor properly assessed the tax for fabrication labor. As such, I do not have the authority to waive the assessment.
Finally, Code of Virginia § 58.1-105 (copy enclosed) grants the Tax Commissioner the authority to accept an offer in compromise if an assessment is of doubtful collectibility. While you indicate that it would be a serious financial burden to incur such a liability, you have not submitted any financial statements which reflect the inability of the business to pay the assessment. Without such information, the department cannot consider an offer in compromise.
The Taxpayer will receive an updated bill with interest accrued to date. The bill should be paid within 30 days to avoid accrual of additional interest. If you have any questions regarding this determination, you may contact*************at****************.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9310T
Rulings of the Tax Commissioner