Tax Type
Retail Sales and Use Tax
Description
Real estate development
Topic
Taxability of Persons and Transactions
Date Issued
06-09-1986
June 9, 1986
Re: §58.1-1821 Application/ Sales and Use Tax
Dear ******************
This will reply to your letter of January 15, 1986 in which you submit for reconsideration an application for correction of sales and use tax assessment in the above reference case. This also has reference to copies of contracts and invoices which were remitted to the department by letter dated April 21, 1986 in support of taxpayer's application for correction.
FACTS
In connection with its construction of several residential real estate developments, ********* (taxpayer), contracted with various dealers for the purchase and installation of certain landscape items and floor covering. Taxpayer was assessed sale and use tax for certain items furnished in connection with several of such contracts. Taxpayer has contested the assessment on the grounds that it was not a using and consuming contractor of the items so purchased and installed.
DETERMINATION
§58.1-610.A of the Virginia Code provides in pertinent part that:
Any person who contracts...to perform construction,.... or any other service with respect to real estate,... 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.
However, §58.1-610.D of the Code provides that, [t]angible personal property incorporated in real property construction which loses its identity as tangible personal property shall be deemed to be tangible personal property used or consumed within the meaning of this section. [Therefore] [a]ny person - selling fences, venetian blinds,.._ floor coverings (as distinguished from the floors themselves),... shall be deemed to be a retailer of such items and not a using or consuming contractor with respect to them...(Emphasis added)
§630-10-27 of the Virginia Retail Sales and Use Tax Regulations defines "floor coverings" as used in the above referenced code section to include, "rugs, mats, padding, wall-to-wall carpet when installed by the tack strip or stretch-in methods, and other floor coverings which are not glued, cemented, or otherwise permanently attached to the floor below."
In addition, §630-10-40.B of the regulations provides that, "[w]hen a nurseryman... makes retail sales of shrubbery and similar items, and as part of the transaction agrees to transplant them on the land of the purchaser for a lump sum, the tax applies to the total charge."
However, §630-10-40.C of the regulations, provides that "any landscaper [or] nurseryman.... who goes beyond the sale and planting of shrubbery, sod, etc., and contracts to grade, seed, and fertilize lawns or to provide periodic fertilizing or weed killing treatment is deemed to be a consumer of all tangible personal property used in performing such service and must pay the tax on such property at the time of purchase. (Emphasis added)
Based on the contracts and invoices submitted and information received from the department's auditor, taxpayer was properly held subject to the tax on its purchases of shrubbery, plants, trees, and other items from nurserymen or landscapers, where such contracts did not represent full service landscape contracts as described in §630-10-40.C above. Rather, such contracts as have been submitted represent separate one time purchases by taxpayer of certain landscape items and services related to the installation or transplantation thereof.
With regard to taxpayer's contracts for the purchase and installation of floor covering, all items held subject to tax in the audit purchased from **** will be removed. However, the only other floor covering contracts taxpayer has remitted to the department concern ******* which, according to such contracts, called for the installation of floor covering by the tack strip method. Therefore, I must conclude that the remainder of the floor covering purchased by taxpayer did not become the floors themselves, and taxpayer was properly held subject to the tax in the audit in making such purchases.
Based on all of the foregoing, the audit will be adjusted as indicated above to remove items purchased from***************. Should taxpayer wish to submit copies of additional contracts to refute the facts set forth herein, they may be furnished to the Department's Technical Services Section at P.O. Box 6-L, Richmond, Virginia 23282, within 30 days of the date of this letter. The remainder of the audit however, is correct as issued.
Sincerely,
W.H. Forst
Tax Commissioner
Rulings of the Tax Commissioner