Tax Type
Retail Sales and Use Tax
Description
Transitional provisions for real estate construction contracts
Topic
Payment and Refund
Rate of Tax
Date Issued
03-06-1987
March 6, 1987
Re: Request for Ruling/Sales and Use Tax
Dear **********************
This will reply to your letter of January 9, 1987, in which you request a ruling on the availability of refunds for the additional 1/2 % sales and use tax your corporation will pay on and after January 1, 1987 for materials used in real estate construction contracts.
The plans and specifications for the construction project in question were dated and published on October 6, 1986, prior to the enactment of the recent sales and use tax rate increase. However, the project was not bid until October 29, 1986.
§58.1-639 of the Code of Virginia provides special transitional provisions for certain real estate construction contracts. Under these transitional provisions, contractors may obtain refunds of the additional 1/2 % tax they pay on and after January 1, 1987 on their purchases in connection with bona fide real estate construction contacts. §58.1-639 of the Code of Virginia also provides that the term "bona fide contract" shall "include but not be limited to those contracts which are entered into prior to the enactment of the increase in the state sales and use tax rate, provided that such contracts include plans and specifications.
In this instance, the plans and specifications for the project were prepared prior to the enactment of the 1/2 % sales and use tax rate increase on October 27, 1986. However, your firm's bid on the project was not made until after the enactment of the rate increase and the contract presumably was not awarded until still later. As such, I cannot conclude that the transitional provisions allowing for refunds of the additional 1/2 % tax are applicable to this real estate construction contract.
If you have any further questions with respect to the transitional provisions, please do not hesitate to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner