Tax Type
Retail Sales and Use Tax
Description
Out-of-state contractor/fabricator
Topic
Taxability of Persons and Transactions
Date Issued
12-14-1987
December 14, 1987
Re: Request for Ruling/Sales and Use Tax
Dear ****************
This will reply to your letter of November 23, 1987, in which you request a ruling on the application of the sales and use tax to a client's contracting operations in Virginia.
FACTS
Your client is engaged in the production of building materials at an Arkansas manufacturing plant. Your client itself uses certain of the materials in its role as a real estate construction contractor in Virginia and other states. In addition, some materials are sold at retail to other real estate construction contractors. Your client does not maintain an inventory of raw materials at its Arkansas plant, but instead purchases raw materials on a job-by-job basis.
Your client will collect the Virginia sales tax when materials are sold to other contractors within the state, but wishes to determine how the tax will apply to materials produced in its Arkansas plant for its own use in Virginia real estate construction contracts.
RULING
§58.1-610 of the Code of Virginia provides that:
-
- Any person who contracts...to perform construction...or any other service with respect to real estate or fixtures thereon, and in connection therewith to furnish tangible personal property, shall be deemed to have purchased such tangible personal property for use or consumption. Any sale...to...such person shall be deemed a sale...to...the ultimate consumer and not for resale...
Inasmuch as a real estate construction contractor is deemed to be the taxable user or consumer of all articles of tangible personal property to be furnished under a construction contract, any materials purchased in or imported into Virginia by your client would be subject to the sales and use tax.
The basis of the tax is the sales price or cost price of the property to your client, except when property is imported into Virginia six months or more after purchase, in which case the tax is based upon current market value. With respect to building materials produced by your client at its Arkansas plant, the basis of the tax would be the cost price of the raw materials that are fabricated into building materials for use in Virginia.
§58.1-611 of the Code of Virginia would provide your client a credit against the Virginia tax to the extent that materials used in Virginia were previously subjected to a sales or use tax in the state in which they were purchased (see Virginia Regulation 630-10-29). The credit would also be available with respect to tax paid to Arkansas on raw materials purchased in that state that were fabricated into building materials for use in Virginia real estate construction contracts.
I trust that this will answer the questions posed in your letter, but please feel free to contact the department if any further questions arise.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner