Tax Type
Retail Sales and Use Tax
Description
Contractors; Installation of Computer Wiring
Topic
Taxability of Persons and Transactions
Date Issued
04-20-1992
April 20, 1992
Re: Retail Sales & Use Tax
Dear**************
This will reply to your letter of September 24, 1991 in which you seek correction of a sales and use tax assessment for * * * (the Taxpayer).
FACTS
The Taxpayer is [a] computer development and service business that also provides facilities management. The Taxpayer was audited for the period from June 1988 through May 1991, which resulted in an assessment of * * *. The Taxpayer has paid the uncontested portion of the assessment and contests four items amounting to * * * * in tax.
DETERMINATION
The Taxpayer contests four items which will be addressed separately below.
Telephone System A vendor sold and installed a telephone system in the Taxpayer's Virginia location. While the contract for the sale and installation stated that the total price included sales tax, the tax was not separately stated. Va. Code Sec. 58.1-625 provides in pertinent part, "[T]he tax. . .shall be paid by the dealer, but the dealer shall separately state the amount of the tax and add such tax to the sales price or charge.' Since the tax was not separately stated on the invoice, I must conclude that the sales tax was not paid. While a dealer is obligated to collect and remit the tax on their sales to the Taxpayer, Virginia's position on the legal obligation of the tax is clear.
The statute makes the tax the legal debt of the purchaser (U.S. v. Forst, 442 F.Supp. 920 (W.D. Va. 1977) aff'd 569 F.2d 811 (4th Cir. 1978)). Based on the foregoing, I find no basis for a correction of the tax assessed on the purchase of the telephone system.
However, if the Taxpayer can provide written documentation that the vendor collected and remitted the tax to the department, the department's Technical Services Division will review the information and make any necessary revisions.
Software The Taxpayer purchased software through the mail from California and was charged tax by the California company. The Taxpayer has submitted documentation that the Virginia sales tax was remitted by the California company. The assessment will be revised by the Technical Services Division to reflect this payment and any applicable refund.
Computer The Taxpayer purchased a computer from Maryland and the keyboard from a vendor in Georgia, both of which were directly shipped to the Taxpayer's Maryland location. The Taxpayer has submitted sufficient documentation that the items were delivered directly to the Maryland location and therefore those items will be removed from the audit and the assessment revised.
Wiring The Taxpayer contracted with a vendor to "wire' the Taxpayer's offices for computers. The wiring was installed inside the walls and ceiling and cannot be easily removed. Virginia Regulation (VR) 630-10-27(G) provides that a "person selling and installing tangible personal property that becomes real property after installation is generally considered a contractor. . . .' A contractor is defined in VR 630-10-27(A) as "any person who contracts to perform construction, reconstruction, installation, repair or any other service with respect to real estate or fixtures thereon. . .' (Emphasis added) (See also, P. D. 90-210 (11/28/90) copy enclosed). Accordingly, the contractor is deemed to be the user and consumer of all tangible personal property used in connection with the installation of the cabling and should pay the tax to its suppliers at the time of purchase of such property. Based upon the above, installation of computer wiring is deemed to be a service with respect to real estate and the charge by the vendor/contractor to the Taxpayer is not subject to the tax. Therefore, the assessment will be revised in accordance with this policy.
Any documentation submitted should be directed to the Department of Taxation, Offices Service Division, Technical Services Section, P.O. Box 6-L, Richmond, Virginia 23282. The Taxpayer's audit will be adjusted in view of the above and any additional information received within thirty (30) [days] of receipt of this letter, and a revised assessment will be issued under separate cover. While the Taxpayer will be allowed to submit documentation to support this appeal, to avoid future tax liability the Taxpayer must require the tax to be broken out on future invoices.
If you have any questions regarding this matter, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner