Tax Type
Retail Sales and Use Tax
Description
Boiler sales and installation
Topic
Taxability of Persons and Transactions
Date Issued
09-18-1986
September 18, 1986
Re: Request for Ruling/Sales and Use Tax
Dear *********************
This will reply to your letter of July 28, 1986, in which you wish to determine the application of the sales and use tax to various transactions.
You note in your letter that your company is engaged in the sale of boilers, burners, parts, and controls. In addition, your company provides installation for boilers and burners and provides service for boilers and burners. I will address below the application of the tax to each type of transaction.
In general, all sales of tangible personal property by your company are subject to the tax. The tax is to be collected on the "sales price" of the property sold. The term "sales price" is defined in § 58.1-602.17 of the Code of Virginia as "the total amount for which tangible personal property or services are sold, including any services that are a part of the sale." Excluded by statute from the definition, however, are separately stated installation charges and separately stated charges for the delivery of property to the purchaser. In addition, Virginia Code § 58.1-608.2 provides an exemption from the tax for separately stated repair labor charges.
When your company provides boiler or burner service, it will therefore need to collect the tax on the total charge made to the customer, excluding only the charge made for repair labor. Similarly, the tax applies to the total charge made to customers when boilers, burners, parts, or controls are sold without installation (of course, separately stated charges for delivering the property to the purchaser can be excluded from the tax base). When your company installs boilers or burners that become affixed to realty, it is acting as a contractor and must remit the tax as the ultimate user or consumer of the tangible personal property used in the project. To assist you, I have enclosed copies of Virginia Regulation 630-10-95, which explains the sales price concept, Virginia Regulation 630-10-90, which explains the application of the tax to repair businesses, and Virginia Regulation 630-10-27, which explains the application of the tax to contractors respecting real estate. In addition, it should be noted that Virginia Code § 58.1-608 provides numerous other exemptions from the sales and use tax, including ones for certain tangible personal property purchased by industrial manufacturers and processors. In instances where your company sells property and receives from the purchaser a valid certificate of exemption, you will be relieved from the collection of the tax.
As to your last question involving the distinction between fabrication labor and installation labor, it may prove beneficial for you to provide specific examples applicable to your company. In general, however, fabrication labor is any labor that goes into the production of the product itself, whether such production goes on at your company's plant site or at a job site. Installation labor would thus be any labor rendered after the product is complete in order to install it for the customer. For instance, all labor utilized in the fabrication and assembly of a boiler and its related parts would be fabrication labor, while the labor utilized to place the boiler on a platform and connect it to the customer's water supply and electrical systems would represent installation labor.
If you have any further questions, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner