Tax Type
Retail Sales and Use Tax
Description
Government transactions; Contractor's purchases on behalf of government
Topic
Taxability of Persons and Transactions
Date Issued
02-28-1997
February 28, 1997
Re: § 58.1-1821 Application: Retail Sales & Use Tax
Dear****************
This is in reply to your letter in which you seek a correction of the department's sales and use tax assessment issued to********* (the "Taxpayer"), for the period June 1993 through May 1996. I apologize for the delay in our response.
FACTS
The Taxpayer sells and installs fences. Pursuant to a contract with a general contractor, the Taxpayer installed fencing at a county high school. The department's audit held the sales of fencing taxable. The Taxpayer disagrees with the assessment stating that the installation of fencing was for a governmental entity, and taxes were accordingly not applicable.
DETERMINATION
Code of Virginia § 58.1-610(D) provides that:
-
- Any person selling fences ... shall be deemed to be a retailer of such items and not a using or consuming contractor with respect to them, whether he sells to and installs such items for contractors or other customers ...." (Emphasis added).
A review of the relationship between the Taxpayer, the general contractor, and the government entity reveals that a real property construction contract existed between the general contractor and the governmental entity. Accordingly, and in conjunction with Virginia Regulation (VR) 630-10-45, the contract was for the provision of services rendering the general contractor liable for payment of the tax on all purchases of tangible personal property. As the Taxpayer was a retailer selling and installing fencing for the general contractor, and not the governmental entity, the payment of the invoice rested with the general contractor, as the funds of the general contractor were bound in the transaction, and not the public funds of the governmental entity.
Accordingly, l do not find sufficient cause to allow any adjustment of the audit. I do note, however, that based on a review of the audit, the Taxpayer's right to assess the general contractor for payment of the tax has not yet been lost to the statute of limitations. The general contractor, as a using and consuming contractor is liable for payment of the tax on all purchases of tangible personal property.
Please return your payment for the balance of the deficiency totaling ******to the department's Office of Tax Policy, Post Office Box 1880, Richmond, Virginia 23218-1880, within 30 days. If payment is not received within that time, interest will continue to accrue on the balance due. If you have any questions regarding this matter, please contact *******of the department's Office of Tax Policy at ********* .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11561Q
Rulings of the Tax Commissioner