Tax Type
Retail Sales and Use Tax
Description
Government transactions; Contractor's purchases on behalf of government.
Topic
Taxability of Persons and Transactions
Date Issued
11-05-1997
November 5, 1997
Re: Request for Ruling: Retail Sales and Use Tax
Dear****************
This will reply to your letter in which you request a sales and use tax ruling on behalf of your firm, ****** (the "Taxpayer").
FACTS
The Taxpayer is a Virginia corporation that sold concrete to an out-of-state construction contractor. The contractor used the concrete in the performance of contract work at a United States military installation in Virginia. The contractor provided the Taxpayer with a governmental exemption certificate, Form ST-12, to make exempt purchases of the concrete. The exemption for tangible personal property used and consumed by the United States was checked on the Form ST-12. The Taxpayer believes the contractor is not entitled to this exemption based on Title 23 of the Virginia Administrative Code (VAC) 10-210-693 (formerly Virginia Regulation 630-10-45[E]).
RULING
Title 23 VAC 10-210-410(J) states that "purchases of tangible personal property by contractors in connection with real property construction contracts with the governments of Virginia or the United States or political subdivisions thereof, are sales to such contractors for their own use or consumption and contractors are subject to the tax on such transactions..." Title 23 VAC 10-210-410(A) provides that "[n]o sale to a contractor is exempt on the ground that the other party to the contract is a governmental agency, ..." Thus, contractors are required to take the payment of sales and use taxes into consideration when submitting bids and should pay the appropriate sales and use taxes on all purchases for their use and consumption. As the Taxpayer points out, this policy is reiterated in Title 23 VAC 10-210-693.
The only exception to this rule is when the credit of a governmental entity is bound directly and the contractor has officially been designated as the purchasing agent for the government. These conditions are generally noted on the purchase orders issued by the contractor.
The department's policy on the application of the governmental exemption to government contractors is longstanding. I have enclosed Public Documents 88-197 (7/6/88), 91-22 (2/28/91), and 96-132 (6/14/96) to provide the Taxpayer with some examples of the department's position on this issue in similar cases.
The Taxpayer indicates that the contractor has refused to pay the sales taxes that were invoiced to the contractor. Title 23 VAC 10-210-340 requires dealers to pay the tax to the state and provides that "the tax is a debt from the purchaser, consumer or lessee to the dealer until paid and is recoverable at law in the same manner as other debts." The Taxpayer, having complied with the Commonwealth's sales and use tax laws, is legally entitled to recover the sales taxes charged to the contractor.
I hope the information above addresses your concerns. I have enclosed a copy of the department's new regulations for the Taxpayer's use. If you have additional questions concerning this matter, please contact***** of my Tax Policy staff at ***** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12816S
Rulings of the Tax Commissioner