Tax Type
Retail Sales and Use Tax
Description
Difference between rate charged and rate imposed; customer liability
Topic
Rate of Tax
Date Issued
02-05-1997
February 5, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear***********
This is in response to your letter seeking correction of the sales and use tax audit assessment issued to********* (the Taxpayer). I apologize for the delay in responding to your letter.
FACTS
The Taxpayer owns and operates retail pharmacies in Virginia. An audit for the period January 1993 through December 1995, resulted in an assessment of use tax on untaxed purchases of tangible personal property used or consumed in the operation of the Taxpayer's business.
The Taxpayer takes exception to the tax assessed on repairs of compressors that are part of the heating and air conditioning systems in its stores. The Taxpayer maintains that the contractor who performed the repairs, not the Taxpayer, is liable for the tax on the compressors repaired or installed. The Taxpayer also takes exception to the tax assessed on two purchases from one supplier and maintains that the supplier had charged a 31/2 percent sales tax on the items purchased.
DETERMINATION
Real property repairs
As the heating and air conditioning equipment in this case is a fixture of the
realty, Code of Virginia § 58.1-610(A) establishes that the contractor is ultimately liable for the tax on its purchases and does not pass the tax onto anyone else as a tax. Accordingly, I find basis for removing these invoices from the audit.
3 ½ percent tax charged on purchases
Based on the invoices presented, it appears that the supplier charged a 3 ½ percent sales tax. Since the Virginia retail sales and use tax rate is 4 ½ percent, the Taxpayer is still liable for the one percent difference. The audit will be adjusted to only assess a one percent tax on these two purchases.
Based on all of the foregoing, the auditor will revise the audit in accordance with this determination as soon as practical. Upon completion of the revision, a revised audit report and a revised bill will be sent to the Taxpayer.
If you should have any questions about this determination, please contact******* at ********** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11321R
Rulings of the Tax Commissioner