Tax Type
Retail Sales and Use Tax
Description
Services; repair and installation; Separately stated charges.
Topic
Taxability of Persons and Transactions
Date Issued
02-19-1998
February 19, 1998
Dear**********:
Ruling of Commissioner, P.D. 98-28
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 July 1991 through October 1997.
FACTS
The Taxpayer, a general contractor, contracts with subcontractors for the installation of carpet, floor covering, cabinets and counter tops, in new construction. As a result of the department's audit an assessment was made for untaxed purchases. At issue is the tax assessed to labor charges that were not separately stated on the invoice for the purchase and installation of carpet. In addition, the Taxpayer takes exception to the tax assessed on charges for the purchase and installation of cabinets, vanities, and countertops.
DETERMINATION
Code of Virginia Sec. 58.1-610 provides that:
Code of Virginia Sec. 58.1-610(D) also states that:
Installation of carpet
The Taxpayer contracted with a subcontractor for the purchase and installation of carpet in new homes. The carpet is installed by the tack strip method and remains tangible personal property. The floor covering subcontractor in this case is a retailer. The subcontractor charged the tax on the materials but not the installation charges. The auditor held taxable both labor and materials since they were not separately stated on the invoice. However, additional information was obtained from the subcontractor concerning the transactions in question. The Taxpayer provided copies of job orders for the transactions held taxable in the audit.
Based on the information before me, the job order indicates a break out of labor and material charges. Because this is a first audit, I will agree to remove from the assessment the tax assessed on installation charges for which the Taxpayer can provide job orders which illustrate separately stated installation charges. In the future, in order for installation charges to be exempt from the tax they must be separately stated on the invoice.
Installation of Cabinets, Vanities, and Countertops
The Taxpayer contracted with a subcontractor for the purchase and installation of cabinets, vanities, and countertops. The Taxpayer was billed a lump sum charge for materials and installation. The auditor assessed the tax on the total charge as no sales tax was billed on the invoice. The Taxpayer provided a copy of the proposal from the subcontractor which indicates that the sales price includes the materials, freight, taxes and installation of the cabinets, vanities, and countertops. In this case, the Taxpayer was unable to provide documentation that the tax was properly applied to the transactions in question.
Based on the information presented and the fact that the Taxpayer has not provided any new evidence to support its claim, I find no basis for adjusting the audit regarding these contested purchases. Nevertheless, I will allow the Taxpayer an additional 60 days to provide the department with additional documentation regarding this issue.
Summary
The assessment will be revised as set forth herein and a revised Notice of Assessment will be mailed to the Taxpayer as soon as practicable. If the Taxpayer can provide additional documentation with respect to the cabinets, vanities, and countertops issue, the department will review this information and, if appropriate, revise the assessment. The information should be made available to the department within 60 days of the date of this letter. The information should be mailed to the department's Office of Tax Policy, P.O. Box 1880, Richmond, Virginia 23218-1880. If the documentation is not available within the specified period, the assessment will be considered correct as issued.
If you have any questions regarding this letter, please contact ***** of my Office of Tax Policy at *****.
Dear**********:
Ruling of Commissioner, P.D. 98-28
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 July 1991 through October 1997.
FACTS
The Taxpayer, a general contractor, contracts with subcontractors for the installation of carpet, floor covering, cabinets and counter tops, in new construction. As a result of the department's audit an assessment was made for untaxed purchases. At issue is the tax assessed to labor charges that were not separately stated on the invoice for the purchase and installation of carpet. In addition, the Taxpayer takes exception to the tax assessed on charges for the purchase and installation of cabinets, vanities, and countertops.
DETERMINATION
Code of Virginia Sec. 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.
- 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.
-
- the law treats every contractor as the user or consumer of all tangible personal property [which becomes real property upon installation] furnished to him or by him in connection with real property construction, reconstruction... and similar contracts.
Code of Virginia Sec. 58.1-610(D) also states that:
-
- 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,... floor coverings (as distinguished from the floors themselves), cabinets, kitchen equipment... or other like 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.
Installation of carpet
The Taxpayer contracted with a subcontractor for the purchase and installation of carpet in new homes. The carpet is installed by the tack strip method and remains tangible personal property. The floor covering subcontractor in this case is a retailer. The subcontractor charged the tax on the materials but not the installation charges. The auditor held taxable both labor and materials since they were not separately stated on the invoice. However, additional information was obtained from the subcontractor concerning the transactions in question. The Taxpayer provided copies of job orders for the transactions held taxable in the audit.
Based on the information before me, the job order indicates a break out of labor and material charges. Because this is a first audit, I will agree to remove from the assessment the tax assessed on installation charges for which the Taxpayer can provide job orders which illustrate separately stated installation charges. In the future, in order for installation charges to be exempt from the tax they must be separately stated on the invoice.
Installation of Cabinets, Vanities, and Countertops
The Taxpayer contracted with a subcontractor for the purchase and installation of cabinets, vanities, and countertops. The Taxpayer was billed a lump sum charge for materials and installation. The auditor assessed the tax on the total charge as no sales tax was billed on the invoice. The Taxpayer provided a copy of the proposal from the subcontractor which indicates that the sales price includes the materials, freight, taxes and installation of the cabinets, vanities, and countertops. In this case, the Taxpayer was unable to provide documentation that the tax was properly applied to the transactions in question.
Based on the information presented and the fact that the Taxpayer has not provided any new evidence to support its claim, I find no basis for adjusting the audit regarding these contested purchases. Nevertheless, I will allow the Taxpayer an additional 60 days to provide the department with additional documentation regarding this issue.
Summary
The assessment will be revised as set forth herein and a revised Notice of Assessment will be mailed to the Taxpayer as soon as practicable. If the Taxpayer can provide additional documentation with respect to the cabinets, vanities, and countertops issue, the department will review this information and, if appropriate, revise the assessment. The information should be made available to the department within 60 days of the date of this letter. The information should be mailed to the department's Office of Tax Policy, P.O. Box 1880, Richmond, Virginia 23218-1880. If the documentation is not available within the specified period, the assessment will be considered correct as issued.
If you have any questions regarding this letter, please contact ***** of my Office of Tax Policy at *****.
Rulings of the Tax Commissioner