Tax Type
Retail Sales and Use Tax
Description
Telephone utilities; Digital switching equipment
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
01-14-1988
January 20, 1988
Re: Request for Ruling/Sales and Use Tax
Dear******************
This will refer to your letter of November 24, 1987 to ***********letter of November 10, 1987 to******* and your recent telephone conversations with a member of the department's Tax Policy Division, regarding the application of the sales and use tax to your corporation's operations.
As noted in your letters and telephone conversations, your corporation is engaged in the procurement and installation of digital switching equipment for telephone utilities that enjoy an exemption from the sales and use tax under §58.1-608.10 of the Code of Virginia. This statute provides an exemption from the tax for tangible personal property purchased or leased by a public service corporation subject to a state franchise or license tax based on gross receipts "for use directly in the rendition of its public service."
Your letters state that the equipment in question is used directly in the rendition of public utility service; thus, could be purchased by the utilities themselves exclusive of the tax. In addition, you noted in your most recent telephone conversation that the digital switching equipment is freestanding and does not become affixed to real estate after installation.
Based upon the facts presented, your corporation may purchase the digital switching equipment from its vendors under resale certificates of exemption, Form ST-10. In turn, your corporation may resell the equipment to a public utility exclusive of the tax provided that the utility furnishes a certificate of exemption, Form ST-20, or a copy of its direct payment permit to your corporation. It should be noted, however, that this ruling applies only to the furnishing and installation of equipment that retains its status as tangible personal property and does not become a part of real estate after installation.
In the event that your corporation furnishes and installs tangible personal property that becomes affixed to real estate after installation, it will be deemed a contractor subject to the provisions of §58.1-610 of the Code of Virginia and Virginia Regulation 630-10-27. Under these provisions, a contractor respecting real estate is generally considered to be the taxable user or consumer of all tangible personal property furnished in connection with its contracts.
I trust that this will answer your questions, but please do not hesitate to contact the department if you require any further guidance.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner