Tax Type
Retail Sales and Use Tax
Description
Fabricator applying specialty coatings; Rental of maintenance equipment
Topic
Taxability of Persons and Transactions
Date Issued
04-04-1988
April 4, 1988
Re: Ruling Request
Retail Sales and Use Tax
Dear****************
I apologize for the delay in responding to************** request for a ruling regarding the application of the sales and use tax to your company, **************. I hope that this delay has not caused you too much inconvenience.
FACTS
Primarily, ************* (Company) is in the business of applying specialty coatings to metal shop parts. In addition, Company rents certain equipment (less operator) to its customers and makes retail sales of various types of parts. A significant portion of Company's business is with the United States Navy and/or with subcontractors performing work for the Navy. Company wishes to determine the application of the tax to several different situations.
RULING
Based upon the information that has been provided to the department, Company is a fabricator as defined in Virginia Regulation 630-10-37. Furthermore, Company qualifies for the manufacturing exemptions set forth under Virginia Code §58.1-608.1. This section exempts tangible personal property from the tax when used directly by an industrial manufacturer or processor in the production of products for sale or resale. Items that may be purchased exempt from the tax are enumerated in VR 630-10-63.
As a fabricator, tax must be collected on the total charge to the customer, including separately stated labor charges. Company is responsible for collecting the tax on all sales unless the purchaser presents a properly executed certificate of exemption.
As set forth in the Virginia Retail Sales and Use Tax Regulations (VR 630-10-45), sales to the federal government are exempt from the tax. In part this, regulation provides:
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- A. Federal government. The tax does not apply to sales to the United States if the purchases are pursuant to required official purchase orders to be paid out of public funds. The tax applies when such sales are made without the required purchase orders and are not paid for out of public funds.
- A. Federal government. The tax does not apply to sales to the United States if the purchases are pursuant to required official purchase orders to be paid out of public funds. The tax applies when such sales are made without the required purchase orders and are not paid for out of public funds.
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- 1. When doing work for the government, is Company responsible for collecting Virginia sales tax? Is Company responsible to vendors for materials purchased to facilitate completion of the job?
No, Company is not required to collect the tax when performing work for the federal government as long as the work is pursuant to required official purchase orders to be paid out of public funds.
Company may make purchases of materials from vendors exempt from the tax, (1) under a resale exemption certificate (Form ST-10) when such materials are passed to the customer or (2) under the industrial exemption (Form ST-11) when such materials qualify under VR 630-10-63 as being used directly in fabrication. Items used indirectly may not be purchased exempt of the tax.
2. When acting as a subcontractor for private shipyards who are contracting with the United States Navy, is Company responsible for collecting Virginia sales tax from the shipyard? Is Company responsible to vendors for materials purchased to facilitate completion of the job?
- 1. When doing work for the government, is Company responsible for collecting Virginia sales tax? Is Company responsible to vendors for materials purchased to facilitate completion of the job?
When Company is acting as a subcontractor to a private shipyard and the shipyard is making purchases from Company for resale to the United States Navy, the shipyard may purchase materials from Company exempt from the tax under a properly executed resale exemption certificate. If the subcontractor is making purchases of tangible personal property used directly in the building, conversion or repair of ships or vessels used or to be used exclusively or principally in interstate or foreign commerce, the ship yard may purchase materials from Company exempt from the tax by presenting a properly executed ST-19 exemption certificate (Shipping Lines and Companies Building or Repairing Ships for Use in Interstate or Foreign Commerce).
As set forth in answer 1 above, company may make purchases of materials from vendors exempt from the tax, (1) under a resale exemption certificate when such materials are passed to the customer or (2) under the industrial exemption when such materials qualify under VR 630-10-63 as being used directly in fabrication. Items used indirectly may not be purchased exempt of the tax.
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- 3. When renting equipment to private shipyards for use aboard Navy vessels, is Company responsible for collecting the Virginia sales tax?
- 3. When renting equipment to private shipyards for use aboard Navy vessels, is Company responsible for collecting the Virginia sales tax?
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- 4. When renting equipment directly to the Navy, is Company responsible for collecting Virginia sales tax ?
No, Company is not required to collect the tax when renting equipment to the Navy as long as the rental is pursuant to required official purchase orders to be paid out of public funds.
5. Is company responsible for paying Virginia sales tax on the maintenance of equipment?
- 4. When renting equipment directly to the Navy, is Company responsible for collecting Virginia sales tax ?
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- 6. Company sells various types of parts at the retail level to the Navy and to private businesses. Is Company responsible for collecting Virginia sales tax on those sales?
Company is responsible for collecting the tax on all sales of parts unless the purchaser presents a properly executed certificate of exemption.
7. Is Company responsible for collecting the Virginia sales tax when performing work for out-of-state businesses?
Under VR 630-10-51, the tax does not apply to sales of tangible personal property in interstate or foreign commerce. Such a sale occurs only when title or possession to the property being sold passes to the purchaser outside of Virginia and no use of the property is made, by the purchaser in Virginia.
- 6. Company sells various types of parts at the retail level to the Navy and to private businesses. Is Company responsible for collecting Virginia sales tax on those sales?
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner