Tax Type
Retail Sales and Use Tax
Description
Construction
Topic
Taxability of Persons and Transactions
Date Issued
10-15-1996
October 15, 1996
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear*****************
In your letter, you seek correction of the sales and use tax audit assessments issued to ********(the Taxpayer). I apologize for the delay in responding to your letter. Copies of all references are enclosed.
FACTS
The Taxpayer is a general contractor. An audit for the period January 1992 through December 1994 resulted in assessments of use tax for failure to report and pay the use tax on untaxed purchases.
There are two transactions at issue. The first issue concerns the purchase of plants, shrubbery, sod, and lop soil from a landscape contractor. Although the department's auditor found no sales tax charges on the sales invoices from this contractor, the Taxpayer maintains that the contractor paid the sales tax to Virginia.
The other issue concerns a roof structure purchased and used by the Taxpayer in a real property construction job. Although the supplier originally proposed to furnish and install the roof structure, it was subsequently agreed that installation would be done by someone other than the supplier. The Taxpayer maintains that its contract with this supplier included Virginia sales tax on the roofing structure.
DETERMINATION
The legal incidence of the Virginia sales and use tax is upon the purchaser. Although the seller is legally obligated to collect the tax from the purchaser, the statute makes the tax the legal debt of the purchaser. United States v. Forst, 442 F. Supp. (W.D. Va.1977), aff'd, 569 F.2d 811 (4th Cir. 1978). As the purchaser in the transactions in question, the Taxpayer is ultimately liable for payment of the tax.
I would also note that Code of Virginia § 58.1-625 and Virginia Regulation (VR) 630-10-24 require that a registered dealer must separately state the amount of the sales tax and add the sales tax to the sales price or charge. Although the seller has an obligation to collect the sales tax, the Taxpayer as the purchaser bears the ultimate responsibility for proving that the amount of the tax is shown as a separate item on the sales invoice furnished by the seller.
Landscape Contractor. It has been the department's long-standing policy that the sale of plants, shrubbery, sod, and top soil to the final user or consumer is considered a retail sale of tangible personal property, regardless of whether the seller installs such items or not. See VR 630-10-40 as published in 1985. Accordingly, the transaction at issue is deemed a taxable retail sale.
Although you maintain that the Taxpayer paid the sales tax in this instance, you have not provided convincing evidence of such. For instance, the amount of sales tax is not stated on any of the sales invoices reviewed by the auditor. According to the auditor, he verified the absence of a sales tax charge with the contractor's president. For these reasons, I find no basis for removing these items from the audit.
Roofing Structure. As the supplier did not install the roofing structure, the transaction represents the taxable retail sale of tangible personal property. Although the Taxpayer's purchase order states that the price includes sales tax and the supplier's proposal states that taxes at a rate of 4 1/2% are included, the Taxpayer has not furnished any sales invoice or other record of the transaction which specifically states, as required by statute and regulation, the amount of the sales tax that the Taxpayer claims to have been charged. I would further note that this supplier was not registered to collect the Virginia retail sales and use tax at the time of the purchase. In the absence of convincing proof that the sales tax was actually charged and collected by the seller, I find no basis for removing this purchase from the audit.
Based on all of the foregoing, the assessments in this case remain valid. Based on the circumstances of this case and under the authority of Code of Virginia § 58.1-105, interest that has accrued since November 17, 1995 will be waived, provided the Taxpayer pays the within the next 60 days. The Taxpayer will receive updated bills shortly.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/10058R
Rulings of the Tax Commissioner