Bulletin Number
VTB 79-1
Tax Type
Retail Sales and Use Tax
Description
Fences, Carpets, Storm Windows, Storm Doors, Cabinets and Awnings
Topic
Property Subject to Tax
Date Issued
10-01-1979
DATE: October 1, 1979
SUBJECT: Fences, Carpets, Storm Windows, Storm Doors, Cabinets and Awnings
Attached is a copy of Sales and Use Tax Policy Statement 79-1. Please read this carefully as it explains the change in the way sales and use tax applies to persons selling and installing fences, carpets, storm windows, storm doors, cabinets and awnings.
Below are answers to some questions you may have about this change in policy:
Question 1: Where in the Virginia Retail Sales and Use Tax Regulations does it state that persons selling and installing fences, carpets, storm windows, storm doors, cabinets and awnings are contractors for sales and use tax purposes?
Answer: § 1-27 is currently being rewritten to clearly state this policy.
Question 2: I was not aware of this change. How will it affect my operation from January 1, 1979 to the present?
Answer: You should begin immediately to collect and pay tax based on the procedure outlined is the Tax Policy Statement. It will not be necessary to make these changes retroactive to January 1, 1979.
Question 3: How will the tax apply to incomplete jobs that were contracted for before I received notice of this change?
Answer: The tax should be reported and paid based on the contract agreement. If you treated yourself as a contractor you should not charge your customer a tax, but rather pay the 4% tax on the cost price of the materials. If you treated yourself as a retailer, you should charge your customer the tax on the selling price of the materials. If you did act as a retailer, the materials sold may be purchased tax exempt.
Question 4: How does the tax apply if I subcontract the installation of the property?
Answer: When you sell fences, carpets, etc., on an installed basis, the tax must be paid by you on the cost price of the materials. It does not matter whether you actually install the materials or hire a subcontractor for this purpose.
Question 5: I will be making sales with and without installation. Where do I report the tax on those materials that are withdrawn from my tax exempt inventory for installation?
Answer: The cost price of these materials should be included on line 2 of the ST-9A Dealer's Worksheet by instate dealers.
Question 6: Many of my jobs (sale and installation) are with governmental agencies, nonprofit schools, etc., which qualify for sales and use tax exemption. Are materials for these jobs tax exempt?
Answer: No. As a contractor you must pay the tax on all materials used in performing the contract.
Question 7: I sell room-size rugs, free-standing cabinets, etc., which are merely placed on the customer's premises and not attached is any way. Am I a contractor with respect to these items?
Answer: No. You are a retailer and must collect sales tax from the customer on the sales price of the item.
Question 8: Under this new policy, I will be operating strictly as a contractor (selling on an installed basis only). Do I need to retain my dealer registration?
Answer: No. When you file your next dealer return, check the "Final Return" block and send it to the Virginia Department of Taxation with your Certificate of Registration. Report on this return:
a. The cost price of materials is pour inventory that were purchased tax exempt; and
b. Any unreported sales on which you billed sales tax to the customer.
You should also notify your suppliers that the sales tax will apply to all future purchases. If a supplier does not charge the tax, you must pay it directly to the Virginia Department of Taxation on a Consumer's Use Tax Return, Form ST-7. Copies of this return will be furnished on request.
Question 9: I sell carpeting, cabinets, etc. exclusively on an uninstalled basis. How should I bill and pay the tax?
Answer: You are a dealer (retailer) and should purchase your materials for resale tax exempt. You must collect the tax on the selling price of the materials and report and pay it on your dealer return. The following example illustrates the proper way to bill your customers:
Example a. - Businessman A buys carpeting at $10.00 per square yard and sells 50 square yards to a customer uninstalled for $12.00 per square yard.
50 sq. yds. of carpet @ $12.00/sq. yd. = $600
sales tax = 24
Total $624
Question 10: I sell carpeting, cabinets, etc. exclusively on an installed basis. How should I bill and pay the tax?
Answer: You are a contractor and must pay the tax on your materials at the time of purchase. (The tax must be paid on a consumer's Use Tax Return, Form ST-7, if the materials are purchased from a supplier who does not charge the tax.) The following examples illustrate the proper way to bill your customers both on as itemized and lump sum basis:
Example a. - Businessman B buys carpeting at $8.00 per square yard and sells 50 square yards to a customer installed for $10.00 per square yard plus $1.50 per square yard for installation. The charges for materials and labor are separately stated.
50 sq. yds. of carpet @ $10.00/sq. yd. = $500
Installation - 50 sq. yds. @ $1.50 sq. yd. = 75
Total = $575
*Note: This price is determined by adding the material cost ($8.00), tax (4% x $3.00 = 32) and mark-up ($1.68).
Example b. - Businessman C buys carpeting at $8.00 per square yard and sells 50 square yards to a customer installed for a lump sun price of $575.00.
50 sq. yds. carpet installed = $575*
Total $575
*Note: This price is determined by adding the material cost ($8.00), tax (4y x $8.00 32), mark-up and installation charge.
Question 11: I sell carpeting, cabinets, etc. on both an installed and uninstalled basis. How should I bill the tax?
Answer: Since you are operating as a combination retailer/contractor, your inventory of materials may be purchased tax exempt. When installation services are not provided, you should bill your customer as outlined in Example 9a and pay the tax on the selling price of the materials.
When installation services are provided, you should bill your customer as outlined in Example 10a or 10b and pay the tax on the cost price of the materials. This liability may be reported on line 2 of the ST-9A Dealer's Worksheet by instate dealers.
If you have any questions about this change, you may write to the department at P. 0. Box 6-L, Richmond, Virginia 23282 or telephone (804) 786-3971.
Tax Bulletins