Tax Type
Retail Sales and Use Tax
Description
Construction; Excavating contractor
Topic
Taxability of Persons and Transactions
Date Issued
06-27-1997
June 27, 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 audit assessment issued to********** (the "Taxpayer"), for the period August 1990 through July 1996.
FACTS
The Taxpayer is an excavating contractor purchasing stone, fill dirt, and sand for use in real property construction contracts. The Taxpayer's supplier purchased the subject items and paid tax to their supplier. In turn, the Taxpayer's supplier marked-up the materials and sold them to the Taxpayer, charging a lump sum price on the sales invoices. The department's auditor, unable to determine any separation for delivery charges, included only the marked-up portion in the audit calculations. The Taxpayer has submitted letters from its suppliers stating that the incremental charges are delivery charges, and are not taxable. The Taxpayer requests that the department's audit be adjusted to remove such charges.
DETERMINATION
Code of Virginia § 58.1-610 provides that:
-
- 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.
Additionally, Code of Virginia § 58.1-609.5(3) exempts from the sales tax separately stated transportation charges. Title 23 of the Virginia Administrative Code (VAC) 10-210-6000 defines transportation and delivery charges as "charges for delivery from the seller to the purchaser ...."
Under the facts presented, the Taxpayer's supplier of materials is a retailer and should have purchased the materials exempt of the tax under the resale exemption. The sales to the Taxpayer should have included tax on the total sales price of the materials, including the mark-up. If delivery charges were included, such charges were required to be separately stated to be exempt of the tax. See 23 VAC 10-210-4000 (copy enclosed). Since the sales invoices to the Taxpayer listed lump sum charges without separation of delivery charges, the auditor properly assessed the tax. There was no double taxation, as the auditor computed tax only on the marked-up portion of the sales invoice.
Regarding the Taxpayer's submission of signed letters or affidavits relating that such incremental charges are considered delivery charges, it is the department's longstanding policy that such documents in and of themselves are not sufficient to overcome the Taxpayer's burden of proving that the assessment is invalid. The sales tax laws and regulations require that such charges from the seller to the purchaser are to be separately stated. Accordingly, I find that the auditor was correct in holding the incremental charge subject to the tax.
Please return your payment for the balance of the 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 continue to 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/12535Q
Rulings of the Tax Commissioner