Tax Type
Retail Sales and Use Tax
Description
Services; Miscellaneous service enterprises; Plant care services.
Topic
Taxability of Persons and Transactions
Date Issued
04-08-1998
April 8, 1998
Dear***********
This will reply to your letters in which you seek the correction of assessments issued to three retirement residence locations operated by ***** (the "Taxpayer'), spanning the period November 1993 through June 1997.
FACTS
The Taxpayer operates retirement homes in three locations which were audited by the department. Each of the Taxpayer's locations was held liable for use tax on charges for plant maintenance agreements. The Taxpayer maintains that the plant maintenance agreements are exempt from sales tax because the agreements provide for labor only. The department considers the maintenance agreements taxable based on language in the contracts that indicates the agreements provide for parts and labor.
DETERMINATION
Title 23 of the Virginia Administrative Code (VAC) 10-210-910(A) (copy enclosed) defines "maintenance contract' as "any agreement whereby a person agrees to maintain or repair an item of tangible personal property over a specified period of time for a fee which is determined at the time the agreement is entered into.' Paragraph D of this regulation states that maintenance contracts which provide for both repair or replacement parts and labor are taxable, regardless that separate charges are specified for parts and labor.
The Taxpayer has provided the department with a copy of a contract titled "Maintenance Agreement & Guarantee.' Item number 8 of the contract states that "[a]ny plant replaced under [. . .] guarantee, shall be replaced with a plant which is comparable in height and quality of the plant originally installed.' While the terms of the contract provide for labor to maintain and care for the Taxpayer's plants, the maintenance agreement clearly provides for the replacement of plants. For this reason, the maintenance agreement is a taxable parts and labor contract of the type found in paragraph D of Title 23 VAC 10-210-910.
The department's policy with respect to maintenance agreements is longstanding. I have enclosed a copy of P.D. 86-214 (11/3/86) which addresses an analogous situation. I understand the department's ***** District Office has also provided the Taxpayer with information concerning the department's policy. While I am sympathetic with the Taxpayer, the assessments for the three locations are correct. I note that the assessments have been paid in full. If you have any questions concerning my determination, please contact ***** at *****.
Dear***********
This will reply to your letters in which you seek the correction of assessments issued to three retirement residence locations operated by ***** (the "Taxpayer'), spanning the period November 1993 through June 1997.
FACTS
The Taxpayer operates retirement homes in three locations which were audited by the department. Each of the Taxpayer's locations was held liable for use tax on charges for plant maintenance agreements. The Taxpayer maintains that the plant maintenance agreements are exempt from sales tax because the agreements provide for labor only. The department considers the maintenance agreements taxable based on language in the contracts that indicates the agreements provide for parts and labor.
DETERMINATION
Title 23 of the Virginia Administrative Code (VAC) 10-210-910(A) (copy enclosed) defines "maintenance contract' as "any agreement whereby a person agrees to maintain or repair an item of tangible personal property over a specified period of time for a fee which is determined at the time the agreement is entered into.' Paragraph D of this regulation states that maintenance contracts which provide for both repair or replacement parts and labor are taxable, regardless that separate charges are specified for parts and labor.
The Taxpayer has provided the department with a copy of a contract titled "Maintenance Agreement & Guarantee.' Item number 8 of the contract states that "[a]ny plant replaced under [. . .] guarantee, shall be replaced with a plant which is comparable in height and quality of the plant originally installed.' While the terms of the contract provide for labor to maintain and care for the Taxpayer's plants, the maintenance agreement clearly provides for the replacement of plants. For this reason, the maintenance agreement is a taxable parts and labor contract of the type found in paragraph D of Title 23 VAC 10-210-910.
The department's policy with respect to maintenance agreements is longstanding. I have enclosed a copy of P.D. 86-214 (11/3/86) which addresses an analogous situation. I understand the department's ***** District Office has also provided the Taxpayer with information concerning the department's policy. While I am sympathetic with the Taxpayer, the assessments for the three locations are correct. I note that the assessments have been paid in full. If you have any questions concerning my determination, please contact ***** at *****.
Rulings of the Tax Commissioner