Tax Type
Retail Sales and Use Tax
Description
Government transactions; Telecommunication equipment purchase.
Topic
Taxability of Persons and Transactions
Date Issued
01-20-1998
January 20, 1998
Dear*****:
This is in response to your letter of November 7, 1997, which has been forwarded to me from the department's Interstate Audit Unit. The issue you raise concerns the application of the tax to AMP floor boxes purchased by ***** (the ``Taxpayer').
FACTS
The Taxpayer entered into a contract with the federal government to install a telecommunications system at a military installation in Virginia. In a ruling issued to the Taxpayer on February 24, 1995, the department determined that the true object of this contract was for the sale of tangible personal property to the government. Accordingly, the Taxpayer was advised that tangible personal property that ultimately passed to the government may be purchased exempt from the tax for resale. Cabling and other items for installation into real property, however, are taxable to the Taxpayer.
In performance of this contract, the Taxpayer purchased AMP floor boxes. These items house communications connections for telephones, personal computers, and other workstation devices. They are installed in raised floor areas of a building, usually at the feet of the workstation user. If a workstation is moved, the floor boxes can also be disconnected and moved for use at a new area. This feature makes the floor boxes more flexible than permanent outlets.
You inquire if the floor boxes become real property upon installation or remain tangible personal property.
RULING
The distinctions between real and tangible property were addressed by the Virginia Supreme Court in Danville Holding Corp. v. Clement, 178 Va. 223 (1941) and confirmed in later cases. See, for example, Transcontinental Gas Pipe Line Corporation v. Prince William County, 210 Va. 550(1970). In Danville Holding, the Court concluded that ``the intention of the party making the annexation is the paramount and controlling consideration.'
In the instant case, the floor boxes remain tangible personal property upon installation. The portability of the floor boxes is apparently a significant convenience. Further, their design and installation indicate that they are intended to be moved when necessary. Accordingly, the AMP floor boxes purchased by the Taxpayer pursuant to this contract are exempt from the tax for resale to the federal government.
I trust that this information addresses your concerns. If you have further questions regarding this issue, please call ***** in the department's Office of Tax Policy at *****.
Rulings of the Tax Commissioner