12-127 | Virginia Tax

Tax Type

Retail Sales and Use Tax

Description

Purchased of tangible personal property for use or consumption

Topic

Records/Returns/Payments

Tangible Personal Property

Date Issued

08-02-2012

August 2, 2012

Re: § 58.1-1821 Application: Retail Sales and Use Tax

Dear *****:

This reply is in response to your letter in which you seek correction of the retail sales and use tax assessment issued to ***** (the "Taxpayer") for the period April 2007 through January 2010. I apologize for the delay in responding to your letter.

FACTS

The Taxpayer operates a national restaurant chain in Virginia. The Taxpayer protests the use tax assessed on two invoices and offers additional documentation to support its contentions.

DETERMINATION

Floor Repair Services

Virginia Code § 58.1-603 imposes the tax upon the use or consumption of tangible personal property in the state of Virginia.

Virginia Code § 58.1-610 provides, "Any person who contracts orally, in writing, or by purchase order, 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 statute goes on to provide that such person shall pay a use tax on the tangible personal property used.

Title 23 of the Virginia Administrative Code (VAC) 10-210-410 G provides that persons selling and installing floor coverings that become permanently attached to floors are deemed to be using or consuming contractors with respect to such items. Such floor coverings include carpet, wood block, cork, tile, linoleum, and vinyl floor coverings when glued, cemented or otherwise permanently attached to floors or plywood and concrete subflooring.

The Taxpayer presents an invoice from a contractor for the purchase of flooring repairs. The invoice and accompanying cost estimate indicate the repairs include the installation of cement board, water sealant, new tile base and epoxy grout. The repairs also include the removal of the existing tile, grout and the drywall above the floor.

Based on the description included in the purchase invoice and cost estimate, the contractor is providing repair services with respect to real property. The foregoing authorities deem that contractors providing such services are subject to the tax on all materials and supplies used in the provision of its services. Accordingly, as the purchaser of such contracting services, the Taxpayer is not subject to the tax. Therefore, the audit assessment will be revised to remove this item.

*******************

The Taxpayer presents invoices from ********** to support its contention that it purchased contracting services and, therefore the amount assessed in the audit is not subject to the tax. The invoices do not indicate the products or services being provided nor do they reconcile to the amount assessed. The Taxpayer also states that payment for legal fees related to the purchase are included in the assessed amount. However, the invoice presented for the fees references a different vendor.

Virginia Code § 58.1-633 and its companion regulation, Title 23 VAC 10-210-470, provide that every dealer liable for the collection and remittance of sales and use tax is required to keep and preserve for at least three years, adequate and complete records necessary to determine its sales and use tax liability. If adequate records are not available, then the Tax Commissioner is authorized to assess the tax based on the documentation available. Accordingly, I find that the Taxpayer has failed to present adequate documentation to substantiate its claim that the assessed amount is not taxable. As such, there is no basis for its removal from the audit.

CONCLUSION

I understand the tax assessment has been paid in full. Based on this determination, a refund in the amount of ***** in tax plus refund interest relating to the floor repair services issue will be issued to the Taxpayer.

The Code of Virginia sections and regulations cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website. If you have any questions about this determination, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings at *****.

- - - - Sincerely,

- - - - Craig M. Burns
        Tax Commissioner

AR/1-4923311347.M

Rulings of the Tax Commissioner