Tax Type
Retail Sales and Use Tax
Description
Landscaping contractors
Topic
Taxability of Persons and Transactions
Date Issued
10-14-1987
October 14, 1987
Re: §58.1-1821 Application/ Sales and Use Tax
Dear ****************
This will reply to your letter of July 21, 19-87 in connection with an assessment issued to********* (taxpayer), for the audit period July, 1983 through May, 1986. This also has reference to my initial determination letter in this case dated February 27, 1987, (copy enclosed).
Enclosed with your letter are copies of revised invoices from ************* (landscaper), a landscape contractor, showing the payment of certain sales taxes. You ask whether such invoices now correctly report the tax.
The enclosed invoices continue to incorrectly compute the sales tax on the wholesale cost price of the plants and plant materials sold rather than the total sales price of such materials as is required by law. Section 58.1-602(17) of the Virginia Code defines the term "sales price" to mean
-
- the total amount for which tangible personal property or services are sold, including any services that are a part of the sale,... and includes any amount for which credit is given to the purchaser,... without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any other expenses whatsoever.
- the total amount for which tangible personal property or services are sold, including any services that are a part of the sale,... and includes any amount for which credit is given to the purchaser,... without any deduction therefrom on account of the cost of the property sold, the cost of materials used, labor or service costs, losses or any other expenses whatsoever.
In addition, Virginia Regulation 630-10-40, (copy enclosed), treats landscape contractors such as the landscaper in this case as retailers, and not as using and consuming contractors of any plants, shrubbery, and similar items sold in connection with contracts to transplant them onto the land of a purchaser.
Notwithstanding the foregoing, the revised invoices submitted do correctly provide for a separate statement of nontaxable labor and delivery charges by the landscaper, in accordance with Virginia Code §58.1-602(17) cited above. However, these invoices also make separate charges for such items as "overhead", "license", "equipment use", and "profit", and erroneously assume that such amounts qualify for tax exemption. There is no basis however, in the sales and use tax law for exempting these amounts. Therefore, all of these amounts were properly held taxable in the audit, whether or not they were separately stated on any invoices to the taxpayer.
The following represents an example of how the tax should be computed on invoice # 2694, (based on the old 4% sales and use tax rate), if the landscaper continues to include delivery and installation labor charges in its charges for plants and plant materials:
Plants *******
Perennials *******
Mulch *******
Subtotal **********
Less:
Delivery *******
Inst. Labor *******
Subtotal* **********
Sales Tax *******
Delivery ********
Inst. Labor ********
Total ***************
* Amount Subject to Tax
Therefore, the audit assessment will be adjusted at this time to remove the separately stated amounts for delivery and installation labor. In addition, my February 27, 1987 determination letter indicated that an additional adjustment would be allowed for any invoices provided which showed that a portion of the tax due was paid by the taxpayer at the time of its purchases from the landscaper, (e.g., on the cost price of the items purchased). Upon further examination however, it is apparent that the department's auditor has already allowed for such a credit in computing the taxpayer's liability. Therefore, no further adjustment of the audit is necessary on this issue.
Based on all of the foregoing, a revised assessment will be issued to the taxpayer under separate cover within thirty days.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner