Tax Type
Retail Sales and Use Tax
Description
Construction; Fixtures became part of realty upon installation
Topic
Taxability of Persons and Transactions
Date Issued
03-01-1995
March 1, 1995
Re: §58.1-1821 Application: Retail Sales and Use Tax
Dear*****************
This will reply to your firm's letter of August 26, 1994 seeking correction of a retail sales and use tax assessment to***************(the "Taxpayer") for the period October 1990 through September 1993.
FACTS
The Taxpayer contracted with an agency of the federal government to operate a duty free store in Virginia. In connection with this contract, the Taxpayer was required to furnish services and materials necessary for renovation of the facility. To satisfy this requirement, the Taxpayer contracted with a third party subcontractor to fabricate and install store fixtures including store front units, newsstand displays, fixtures, showcases, and gondolas.
The Taxpayer maintains that such display items became realty upon installation and further maintains that the subcontractor is liable for the tax as provided in Code of Virginia §58.1-610(A). It is also noted that the Taxpayer is no longer operating the duty
DETERMINATION
In determining whether property is classified as real or tangible, the department looks to the Virginia Supreme Court decision in Transcontinental Gas Pipe Line Corporation v. Prince William County, 210 Va. 550 (1970). The primary tests applied to the determination are: 1) annexation of the property to realty, 2) adaptation of the realty to the property and, 3) the intention of the parties, with this last being the chief test.
Code of Virginia § 58.1-610 states that "[a]ny person who contracts orally, in writing, or by purchase order, to perform construction, reconstruction, installation, repair, or any other service with respect to real estate or fixtures thereon, and in connection therewith to furnish tangible personal property, shall be deemed to have purchased such tangible personal property for use or consumption." Further, this statute applies whether such person be a prime contractor or subcontractor.
An on-site examination determined that the store front unit, fixtures, displays, and showcases did become realty upon installation. These items were either built into the existing walls or permanently affixed to the ceiling or floor. Accordingly, the subcontractor is deemed to be the taxable user or consumer of all items purchased that become realty upon installation. Therefore, charges to the Taxpayer for these items will be removed from the assessment.
The Taxpayer also protests the assessment for certain other purchases. Since the Taxpayer provided sufficient documents showing that the tax was paid on these items, they will be removed from the assessment.
Based on the foregoing, the audit will be adjusted and a revised notice of assessment will shortly be issued. If you have any questions regarding this letter, you may contact***************.
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- Sincerely,
Danny M. Payne
Tax Commissioner
- Sincerely,
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OTP/8672T
Rulings of the Tax Commissioner