Tax Type
Retail Sales and Use Tax
Description
Construction; Cabinets
Topic
Taxability of Persons and Transactions
Date Issued
03-07-1997
March 7, 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 assessment issued to*********** (the "Taxpayer"), for the period January 1994 through August 1996.
FACTS
The department's audit disclosed that the Taxpayer accepted a bid from a South Carolina company to produce, deliver and install cabinets at a Virginia location. The Taxpayer disagrees with the taxation of the cabinets on the basis that the installer of the cabinets was a contractor, and was subject to payment of the tax as a user and consumer of the cabinets. The Taxpayer requests an abatement of the assessment related to the contested issues.
DETERMINATION
As a general rule, any person in Virginia who installs tangible personal property which becomes permanently affixed to real property is considered a contractor with respect to real estate. Code of Virginia § 58.1-610(D), and as interpreted by Virginia Regulation (VR) 630-10-27(G), provide an exception to this rule. As previously related to the Taxpayer, the exception would be a retailer who sells and installs fences, venetian blinds, window shades, awnings, storm windows and doors, floor coverings, cabinets, kitchen equipment, window air conditioning units and other like or comparable items. As stated in the regulation, any person selling such items, is deemed to be a retailer and not a using or consuming contractor with respect to the enumerated items, whether the retailer sells and installs such items for contractors or other customers, and whether or not such retailer fabricates such items.
Through an agreement established by the Southeastern Association of Tax Administrators, it has been disclosed that the South Carolina business was in fact licensed for retail operation. As the installers of the cabinets were considered to be retailers, notwithstanding the fact that the property took on the status of real property after installation, the tax was to have been paid by you, the Taxpayer. Since the South Carolina business was never registered with Virginia for the collection of the tax, the purchaser (Taxpayer) was responsible for the accrual and remittance of the tax. On the basis that the Taxpayer did not accrue and remit the tax, I find that the auditor correctly included the transaction in the audit calculations. Accordingly, I do not find sufficient cause for an adjustment to the audit.
I will allow, however, for the waiver of the penalty in this instance, on the basis that the Taxpayer's compliance efforts would have been within proper levels, had it not been for the issues in question. Please note that for the future, the Taxpayer will be expected to conform to the compliance requirements as reflected in the revised penalty regulation VR 630-10-80, copy enclosed.
Please return your payment for the balance of tax and interest 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 accrue on the balance due. If you should have any questions regarding this matter, please contact ********** of the department's Office of Tax Policy at *************** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12176Q
Rulings of the Tax Commissioner