Tax Type
Retail Sales and Use Tax
Description
Contractors; Inapplicability of resale exemption
Topic
Taxability of Persons and Transactions
Date Issued
04-30-1985
- April 30, 1985
Re: Request for Ruling/Sales and Use Tax
Dear ****
This will reply to your letter of January 7, 1985, in which you request a ruling on the applicability of the sales and use tax to various transactions involving *****.
Section 58.1-610.A of the Code of Virginia provides:
Any person who contracts....to, perform construction, reconstruction, installation, repair, or any other service with respect to real estate or futures thereon, and in connection therewith to furnish tangible personal property shall be deemed to have purchased such tangible personal property for use or consumption. Any sale...to...such person shall be deemed a sale...to...the ultimate consumer and not for resale, and the dealer making the sale...to...such person shall be obligated to collect the tax...
Under the above statute, a person who furnishes and affixes tangible personal property to real estate is deemed to be a contractor. As a contractor, such person would be required to pay the sales and use tax on all purchases for use in performing contracts, but would not charge to or collect the tax from his customers. It is my understanding that the automatic water softening equipment which your company installs becomes part of real estate after installation. Accordingly, your corporation is deemed to be a contractor when it furnishes and installs water softening equipment for a lump sum. In such cases, your corporation would remit the tax on the price it pays for equipment and installation supplies, just as it does in Tennessee. The same also applies when your corporation installs equipment and charges a monthly rental fee. Repair services rendered with respect to real estate are nontaxable; however, your corporation would be required to pay the tax on all materials used in making such repairs.
***** will be required to register to collect and remit the sales tax if it sells any tangible personal property that it will not affix to real estate and/or if it provides repair services with respect to tangible personal property. If repairs are made to items that retain their status as tangible personal property, your corporation need only collect the tax on the charges made to customers for repair parts as long as service and labor charges are separately stated. If service and labor charges are not separately stated in such instances, the tax will apply to the total repair charge.
Please contact us if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner