Tax Type
Retail Sales and Use Tax
Description
Construction; Contractor's purchases from out-of-state company
Topic
Taxability of Persons and Transactions
Date Issued
05-16-1997
May 16, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear***************
This is in reply to your letter of April 7, 1997, in which you seek a reconsideration and correction of the department's sales and use tax audit assessment issued to your client, ********** (the "Taxpayer"), for the period January 1994 through August 1996.
FACTS
The Taxpayer is a general contractor who accepted a bid from a South Carolina company to produce, deliver and install cabinets. In response to the Taxpayer's initial protest the department held the purchase of the cabinets taxable. The Taxpayer states that it cannot be expected to determine the taxable status of such purchases or if the party with whom the Taxpayer is dealing, is licensed or qualified to do business within the boundaries of Virginia. Accordingly, the Taxpayer states that as the supplier of the cabinets submitted a lump sum invoice, an assumption has been made that sales taxes were included in the bid. The Taxpayer requests waiver of the associated tax, penalty and interest.
DETERMINATION
Code of Virginia § 58.1-610 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.
Title 23 of the Virginia Administrative Code (VAC) 10-210-410 provides further guidance on this issue by stating that:
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- the law treats every contractor as the user or consumer of all tangible personal property [which becomes real property upon installation] furnished to him or by him in connection with real property construction, reconstruction ... and similar contracts.
Code of Virginia § 58.1-610(D) also states that:
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- Tangible personal property incorporated in real property construction which loses its identity as tangible personal property shall be deemed to be tangible personal property used or consumed within the meaning of this section. Any person selling fences, ... cabinets, kitchen equipment, ... or other like or comparable items, shall be deemed to be a retailer of such items and not a using and consuming contractor with respect to them, whether he sells to and installs such items for contractors or other customers and whether or not such retailer fabricates such items.
While I understand the Taxpayer's position regarding the burden of policing its purchases from all potential suppliers, the Taxpayer, as a contractor, and a user and consumer of all purchases, is aware of its responsibility to accrue and remit the tax on purchases where an application of tax has not been designated on the purchase invoice. I have enclosed copies of previous rulings, P.D.'s 87-10 (01/15/87), and 87-205 (09/11/87), which further detail the department's longstanding position.
Based on the information before me, and in light of the foregoing, the auditor's actions were proper in his application of tax. Accordingly, with the exception of continued allowance for waiver of the penalty, l find insufficient cause for reconsideration of my previous decision. The department's assessment totaling***** for tax and interest remains due and payable.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12420Q
Rulings of the Tax Commissioner