Tax Type
Retail Sales and Use Tax
Description
Construction; Above-ground swimming pools
Topic
Taxability of Persons and Transactions
Date Issued
09-04-1996
September 4, 1996
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear*************
This is in response to your letters dated July 26, 1996 and August 23, 1996 in which you seek correction of a sales and use tax assessment issued to ********** (the "Taxpayer") for the period April 1993 through December 1995. note that the uncontested portion of the assessment has been paid.
FACTS
The Taxpayer operates as a home improvement contractor. The only issue under protest is the application of the tax to the sale of certain above-ground swimming pools. At the time of the audit, these sales were deemed to be sales of tangible personal property, and the Taxpayer was held liable for not collecting the tax on such sales. The Taxpayer paid the tax on the cost price of the pools under the contention that these pools become realty upon installation.
The pools in question have an average size of 30' x 30' x 4'. Installation includes a 15" wide walk-around deck, a built-in patio area, and a motor, pump, and filtration system which is wired to the home's electrical system. This installation, which generally requires a building permit, entails significant excavation of the underlying ground. You also point out that the 20 year manufacturer's warranty is transferrable in the event that the homeowner sells his property, but that the warranty is void if the pool is relocated. According to the manufacturer, the structural integrity of the pool may be compromised if the pool is disassembled and then reassembled.
Based on these characteristics, the Taxpayer maintains that upon installation the pools constitute an improvement to realty and not the sale of tangible personal property.
DETERMINATION
Code of Virginia § 58.1-611 provides that:
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- Any person who contracts ... 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.
Consistent with this statute, Virginia Regulation 630-10-27 indicates that "tangible personal property incorporated in real property construction which loses its identity as tangible personal property and becomes real property is deemed to be tangible personal property used or consumed by the contractor."
The distinctions between real and tangible property were addressed by the Virginia Supreme Court in Danville Holding Corp. v. Clement, 178 Va. 223 (1941) and confirmed in later cases. See, for example, Transcontinental Gas Pipe Line Corporation v. Prince William County, 210 Va. 550 (1970). In Danville Holding, the Court concluded that "the intention of the party making the annexation is the paramount and controlling consideration."
Based on the information provided, I would agree that the design and installation of the pools in this case strongly imply a permanent installation. This observation supports your contention that the pools constitute an improvement to realty. I would also note that this determination is consistent with opinions provided to you by a number of assessing officials both within and without Virginia.
Accordingly, the Taxpayer is a using and consuming contractor for purposes of the Virginia retail sales and use tax. As such, the Taxpayer properly paid the tax on the cost price of the pools. As a reminder, however, this application of the tax will change if the Taxpayer sells a pool on an uninstalled basis. In such cases, the Taxpayer must collect the tax from the purchaser on the total sales price of the pool (excluding separately stated transportation charges).
Based on this determination, the contested portion of the assessment will be abated. Please contact ******** in my Office of Tax Policy at ******* if you have any further questions.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/115041
Rulings of the Tax Commissioner