Tax Type
Retail Sales and Use Tax
Description
Government transactions; Tank installation contract
Topic
Taxability of Persons and Transactions
Date Issued
06-14-1996
June 14, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear**************
This will reply to your letter of May 15, 1996 in which you request a ruling as to the sales and use tax application to contract work performed by*********(the "Taxpayer") for state and federal governments.
FACTS
The Taxpayer is currently bidding on the installation of above ground gas tanks with both state and federal government entities. In both instances, tanks will be set on concrete pads and attached to the real estate by electrical conduit. The Taxpayer is requesting a ruling as to the tax treatment of these contracts.
RULING
Virginia Regulation (VR) 630-10-27.J explains the application of the sales and use tax to government contracts as follows:
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- Generally, purchases of tangible personal property by contractors in connection with real property construction contracts with the governments of Virginia or the United States or political subdivisions thereof, are sales to such contractors for their own use or consumption and contractors are subject to the tax on such transactions...Only in instances where the credit of a governmental entity is bound directly and the contractor has been officially designated as the purchasing agent for such governmental entity will such purchases be deemed exempt from the tax.
Based on the information provided in your letter, it appears the above ground gas tanks being installed by the Taxpayer become permanently attached to real property at the time of installation. If this is the case, the Taxpayer is acting as a using and consuming contractor with respect to real estate and would be required to pay the tax on the tank at the time of purchase. As provided above, in instances where the government's credit is bound and the contractor has been officially designated the purchasing agent for the government entity, the contractor is authorized to purchase tangible personal property under a governmental exemption certificate, Form ST-12.
In addition, I would like to point out that a contractor installing raw material storage tanks for a manufacturer would also be able to purchase such tanks exempt under exemption certificate, Form ST-11A. (See P.D. 92-107 (6/24/92) enclosed).
If you should have any further questions, please contact******** Office of Tax Policy, at ****** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11245K
Rulings of the Tax Commissioner