Tax Type
Retail Sales and Use Tax
Description
Nexus; Out-of-state vendors; Construction; Retailer v. contractor
Topic
Taxability of Persons and Transactions
Date Issued
06-13-1997
June 13, 1997
Re: § 58.1-1821 Application: Retail Sales and 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 January 1994 through November 1996.
FACTS
The Taxpayer manufactures ducts, vents, hoods, and other kitchen related equipment. In the present case the Taxpayer manufactured and sold kitchen equipment products, shipping them via common carrier to various locations in Virginia. In instances where the Taxpayer offers to install the equipment, the Taxpayer subcontracts the installation to a Virginia contractor. The Taxpayer states that it is a retailer under Code of Virginia § 58.1-610(D), but that it does not maintain a physical presence, nor does it perform any other activities which would generally give rise to nexus within Virginia.
The department's auditor concluded that, due to the extent of the integration of the equipment to the infrastructure of the building, the Taxpayer was acting in the capacity of a consuming contractor. Accordingly, the auditor assessed tax to the Taxpayer on the cost price of the materials and equipment used and consumed in the performance of a real property construction contract.
The Taxpayer disagrees with the auditor's position and states that because of its classification as a retailer under Code of Virginia § 58.1-610(D), and because it has no established nexus within Virginia, the assessment is in error.
DETERMINATION
Code of Virginia § 58.1-610(A) provides that:
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- Any person who contracts orally, in writing, or by purchase order, 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.
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- This same section further provides under subsection (D) 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, venetian blinds, window shades ... 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. (Emphasis added).
Based on the information before me, the Taxpayer maintains a retail or wholesale place of business, has an inventory of the equipment and/or materials or items which enter into or become a component part of the items installed, and performs installation as part of or incidental to the sale of the above listed items. Accordingly, under Title 23 of the Virginia Administrative Code (VAC) 10-210-410(G), formerly Virginia Regulation 630-10-27(G), the Taxpayer meets the foregoing requirements and is considered a retailer for Virginia sales and use tax purposes. The Taxpayer is not a using and consuming contractor.
Code of Virginia § 58.1-612, copy enclosed, defines the term "dealer" and sets forth the nexus requirements which give the Commonwealth the authority to require a business to register for the collection and remittance of the Virginia sales tax. While the Taxpayer does satisfy the definition of a "dealer," it does not have sufficient activity in Virginia to require it to register and collect the tax.
Based on the foregoing, I find that the department's assessment is in error and has been abated.
If you should have any additional questions regarding this matter, please contact ********** of the is department's Office of Tax Policy at*********** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12197Q
Rulings of the Tax Commissioner