Tax Type
Retail Sales and Use Tax
Description
Construction; Sale not in interstate commerce
Topic
Taxability of Persons and Transactions
Date Issued
09-24-1997
September 24, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear**********
This will reply to your letter in which you seek correction of a sales and use tax assessment issued to ******** (the Taxpayer) for the period September 1990 through April 1996.
FACTS
The Taxpayer is a steel construction contractor involved in real property construction projects both within and outside of Virginia. As a result of the department's audit, an assessment was made for untaxed materials for use in real property contracts.
The Taxpayer takes exception to the taxing of materials purchased for use in certain real property contracts and maintains that the materials were shipped directly from the supplier to the out-of-state job site and that no use of the materials was made in Virginia.
DETERMINATION
Code of Virginia § 58.1-610(A) provides that a person who contracts to perform construction, reconstruction, installation, repair, or any other service with respect to real estate or fixtures thereon and who furnishes tangible personal property is deemed to have purchased the tangible personal property for use or consumption. Title 23 of The Virginia Administrative Code (VAC) 10-210-410 further provides that "the law treats every contractor as the user or consumer of all tangible personal property furnished to him or by him in connection with real property construction, reconstruction, installation, repair, and similar contracts."
23 VAC 10-210-780 states in part that the sales and use tax does not apply to sales of tangible personal property in interstate or foreign commerce. However, the regulation provides that "a sale in interstate commerce occurs only when title or possession to the property being sold passes to the purchaser outside of Virginia and no use of the property is made within Virginia."
The burden of proof is on the Taxpayer to provide documentation to verify that the possession of tangible personal property occurred outside of Virginia. In this case, the Taxpayer was unable to provide documentation that the materials in question were shipped by the supplier directly to the job site outside of Virginia. However, additional information was obtained from the supplier concerning the materials held taxable in the audit. As a result, the audit was revised to remove those purchases in which proper documentation was provided to show that the materials were directly shipped outside Virginia. However, those purchases in which the supplier indicated that the Taxpayer arranged for the shipment of materials to the job site outside of Virginia remained in the audit. These materials are taxable as the Taxpayer made first use of the materials in Virginia.
It is my understanding that in a conversation with a member of my staff, the Taxpayer contends that it did not arrange for the shipment of the materials to the job site. The Taxpayer indicates that it is trying to obtain additional documentation to substantiate its claim that the materials in question were delivered by the supplier to the out-of-state job site.
Based on the information presented and the fact that the Taxpayer has not provided any new evidence to support its claim, l find no basis for adjusting the audit regarding the contested purchases. Nevertheless, l will allow the Taxpayer an additional 60 days to provide the department with additional documentation regarding this issue. This information should be sent to ******** Office of Tax Policy, P.O. Box 1880, Richmond, Virginia 23218-1880. If the documentation is not received within the specified time period, the assessment will be considered correct as issued. If you have any questions regarding this letter, please contact *********at*********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12787T
Rulings of the Tax Commissioner