Tax Type
Retail Sales and Use Tax
Description
Signs
Topic
Taxability of Persons and Transactions
Date Issued
03-25-1986
March 31, 1986
Re: §58.1-1821 Application/Sales and Use Tax
Dear ******************
This will reply to your letter of July 10, 1985, in which you request relief of tax assessed to your businesses the result of a recent sales and use tax audit.
FACTS
A recent audit of your sign printing business produced an assessment for your failure to collect the sales tax from customers on sales of signs. Relief from such assessment is requested because the failure to collect tax was due to a misinterpretation of the law, rather than neglect or fraud. It is noted that your accountants during the audit period in question felt that you were not required to collect the tax. Lastly, you contest the assessment of tax with respect to charges for painting signs provided by customers, stating that the charges to customers in such cases were charges for labor.
DETERMINATION
Section 58.1-603 of the Code of Virginia imposes the sales tax upon "every person who engaged in the business of selling at retail...tangible personal property in this State." Virginia Code Section 58.1-602.16 defines the term "sale" as including "any transfer of title or possession, or both...of tangible personal property...and...the fabrication or tangible personal property for consumers who furnish, either directly or indirectly, the materials used in fabrication."
Under the above statutes, a person who operates a business that sells tangible personal property and/or that fabricates tangible personal property furnished by a customer is required to register and collect the sales tax from his customers on charges for the sale or fabrication of such property. Section 1-100 of the Virginia Retail Sales and Use Tax Regulations published in 1966, 1969, and 1979 explained how the sales tax law applied to sign painters. The regulation specifically stated "[w]hen a sign manufacturer or painter fabricates and paints signs from his own materials, or from materials furnished by others, the tax applies to the total charge for the finished product." The intent of that regulation was that tax should be collected when a person produces or paints a sign. Nonetheless, based upon the reasons stated in your letter, I am willing to accept the compromise suggested in your letter of June 19, 1985 to *****************. The department's audit will be revised accordingly.
For the future, Section 630-10-100 of the Virginia Retail Sales and Use Tax Regulations (copy enclosed) published on January 1, 1985, sets forth clearly how the tax applies to sign painters. Under the regulation, you will be required to collect the tax from your customers whenever you paint a sign using your own materials or materials furnished by a customer. The only exception to this rule is when you paint a sign and then erect it yourself on real estate. Similarly, when you paint a sign on a building, billboard, window, door or other real estate, you will not need to collect the tax from customers.
Please feel free to contact the department if you have any questions on how the tax applies to your business.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner