Tax Type
Retail Sales and Use Tax
Description
Telephone sales and installation
Topic
Taxability of Persons and Transactions
Date Issued
05-19-1988
May 19, 1988
Re: Ruling Request/ Sales and Use Tax
Dear***********
This will reply to your letter of December 4, 1987, on behalf of *********** (taxpayer), seeking a ruling regarding the correct application of the sales and use tax to the taxpayer's telephone equipment sales and installation business.
FACTS
As a result of a recent audit, it was discovered that the taxpayer was paying sales tax on all of his telephone equipment purchases from suppliers but not charging tax in billing customers for the sale and installation of such equipment. The taxpayer states that he has always treated himself as a using and consuming contractor rather than as a retailer of the telephone equipment he purchases for provision to customers.
Accordingly, the taxpayer seeks a ruling on the correct application of the tax to his telephone equipment installation business.
RULING
Virginia Retail Sales and Use Tax Regulation (VR) 630-10-102.2, (copy enclosed), provides that "[t]he tax applies to the total charge for the sale or lease of intercom, interconnect and telephone systems. Separately stated charges for the installation of such systems are not subject to the tax." This regulation continues, "[p]ersons engaged in the sale or lease of such systems must pay the tax on all equipment and supplies used in installation, including but not limited to, equipment and tools and wiring and other similar items."
As a seller and installer of telecommunication equipment, the taxpayer in this case falls squarely within the regulation quoted above. Accordingly, the taxpayer's total charge to customers for the sale and installation of telephone equipment is subject to the tax, including any non-separately stated charges for installation labor. However, the taxpayer should purchase pursuant to resale certificate of exemption, Form ST-10, copies enclosed, any telephone equipment which he will subsequently resell to customers subject to the tax. This equipment would include such items as telephones, telephone accessories, jacks, wall plates, extension cords, etc.
It should be noted further however, that the taxpayer must pay the tax on all of his purchases of tools, equipment and supplies used and consumed in installing telephone equipment, such as wire, tape, wire cutters, etc. Therefore, the taxpayer may not use a resale exemption certificate when making purchases of such items from suppliers.
It is my understanding that as a result of the recent audit the taxpayer has become registered with the department for purposes of collecting and reporting the tax in making retail sales to customers. I understand further that the taxpayer has been contacted by a member of my staff with regard to the outstanding assessment. If the taxpayer has any further questions about the application of the tax to any aspect of his business, he should contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner