Tax Type
Retail Sales and Use Tax
Description
Contractor installing venetian blinds, fences, etc.; Fabrication
Topic
Taxability of Persons and Transactions
Date Issued
03-25-1986
March 25, 1986
Re: Virginia Code §58.1-1821 Application
Sales and Use Tax
Dear *****************
This is in response to your letter of December 13, 1985 in which you apply, on behalf of your client *************** (Taxpayer), for the correction of the assessment which was the result of the department s recent sales and use tax audit.
FACTS
There are two areas of this recent audit being contested by Taxpayer. The first area involves payments made to subcontractors for installed venetian blinds, fences and "free standing" kitchen equipment. Because no sales tax was paid by Taxpayer on these purchases, the taxpayer was assessed use tax on these purchases. You contest the assessment of use tax on these purchases on the basis that the subcontractor was liable for the tax.
The second contested area of this audit involves the assessment of tax on fabrication charges made by an independent contractor for drilling holes in metal sheets supplied by Taxpayer. You contest the imposition of tax on these fabrication charges because your client considers this a service and not a taxable transaction.
DETERMINATION
Virginia Code §58.1-610 D and Virginia Retail Sales and Use Tax Regulation §630-10-27 treat persons who sell and install fences, venetian blinds, window shades, awnings, storm windows and doors, floor coverings, cabinets, kitchen, equipment, window air conditioners and other like or comparable items and who also maintain a place of business with an inventory of such items, as retailers. As such, they are required to collect and to remit sales tax on the charge for such items. Based upon the information presented, it appears that this treatment is applicable to the company that supplied Taxpayer with the kitchen equipment.
Under §630-10-37 of the Regulations "fabrication" is defined as any operation which changes the form or state of tangible personal property; as such, the tax applies to the total charge for the fabrication. The tax applies to the charges for the fabrication of tangible personal property for users and consumers who furnish either directly or indirectly the materials used for the fabrication. The facts in this case indicate that Taxpayer supplied metal sheets to company which drilled holes in these sheets. The work performed by this company changed the form of the metal sheets; therefore, the work performed qualifies as fabrication. Because no tax was paid to the company performing the fabrication operation, Taxpayer incurred a use tax liability for the total charge for the fabrication.
In the event that the seller fails to impose a charge for the tax on the purchaser, the tax remains the obligation of the purchaser. Therefore, based upon the foregoing, we must reject your client's application for correction.
If after reviewing this determination you feel that you have additional information to present and still feel that a hearing is necessary, please contact this office. Unless you contact the department within 30 days, this determination will be final.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner