Tax Type
Retail Sales and Use Tax
Description
Installation of floors and floor coverings; Subcontractors
Topic
Taxability of Persons and Transactions
Date Issued
04-22-1986
April 22, 1986
Re: Ruling Request / Floor Coverings
Sales and Use Tax
Dear *****************
This is in response to your letter of January 16, 1986, in which you request a ruling regarding the applicability of the Virginia Retail Sales and Use Tax to purchases of floors and floor coverings that are made by your client, *********** (Taxpayer). Generally, you ask for a confirmation of the ruling made on October 12, 1984 regarding this same subject. Specifically, you ask what your client must do to ensure that it is paying the proper tax to its subcontractors which install floors and floor coverings.
The ruling to which you refer, dated October 12, 1984, still accurately reflects the department's position on the subject of the sales and use tax treatment of dealers which install floors and floor coverings. This ruling sets forth, in greater detail, the department's interpretation of Virginia Code §58.1-608.10 and the department' 8 position in §630-10-27 of the Virginia Retail Sales and Use Tax Regulations.
To briefly summarize the previous ruling, a contractor which installs floors or floor coverings that become permanently affixed to realty is deemed to be a consuming contractor of all such materials used; as such, they are required to pay tax on the purchase price of all materials. A contractor which installs floors or floor coverings that do not become permanently affixed to realty is deemed to be a retailer; as such, they are required to register as a dealer and to collect the tax on the sale. The sales tax to the consumer is computed upon the total charge from the sale, including installation charges, unless separately stated on the sales invoice.
Because a floor covering dealer will likely be both a retailer and a consuming contractor, they may purchase all floor coverings and other similar items exclusive of the sales tax under a resale exemption certificate. However, when they make use of such inventory items as a consuming contractor, they should remit the tax to the department along with any tax collected on retail sales.
Taxpayer, to ensure that it is paying the proper tax to its subcontractors which are installing floors and floor coverings, should require that the tax be separately stated in any bid that it accepts from a subcontractor. Each bid should separately state the cost of materials, tax and installation charges. It is not enough to rely upon a statement from the subcontractor that the bid includes all applicable sales taxes. We would also suggest that Taxpayer require the subcontractor to state on any bid the method of installation to be used and to state if they are acting as a consuming contractor or as a retailer. This will ensure that Taxpayer is paying the proper tax.
I hope that this has answered your questions and if further questions arise, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner