Tax Type
Retail Sales and Use Tax
Description
Contractor installing sprinkler systems; Pollution control equipment
Topic
Statute of Limitations
Taxability of Persons and Transactions
Date Issued
05-02-1988
May 2, 1988
Re: §58.1-1821 Application/Sales and Use Tax
Dear*******************
This will reply to your letter of March 28, 1988, in which you submit an application for correction of sales and use tax assessed to *************** as the result of a recent audit.
FACTS
*********** (Taxpayer) is primarily engaged as a contractor installing sprinkler systems. In addition, the taxpayer makes a small number of retail sales of sprinkler system materials. A recent audit of the taxpayer produced use tax assessments for materials used by the taxpayer in contracts respecting real estate.
The taxpayer contests portions of the assessment, claiming that certain of the materials included in the audit were assessed outside of the three year statute of limitations. In addition, the taxpayer claims that certain materials were used in an exempt pollution control project and that other materials were used in exempt out-of-state projects.
DETERMINATION
I will address below on a separate basis the three issues raised by the taxpayer:
Statute of Limitations
The taxpayer contends that the department's auditor assessed tangible personal property used in contracts respecting real estate as the property was withdrawn from inventory. By using this method, the taxpayer contends that purchases made prior to the audit period were improperly included in the audit.
Virginia Regulation 630-10-27.B provides that a contractor/ retailer, such as the taxpayer, "may not purchase under a resale exemption certificate any tangible personal property which he knows at the time of purchase will be furnished by him in connection with any specific contract." As such, the tax on articles for use in contracts respecting real estate is due at the time the articles are purchased, not at the time they are withdrawn from inventory for use in a contract respecting real estate. only when a contractor/retailer removes articles from his resale inventory for use in a contract respecting real estate will the tax apply to an inventory withdrawal.
As such, the department will revise its audit to delete any articles that were purchased by the taxpayer prior to audit period and improperly included in the audit.
Pollution Control Equipment
Pursuant to §58.1-608.52 of the Code of Virginia, the department will further revise its audit if the taxpayer will furnish a copy of its contract or subcontract for the pollution control project in question. In addition, the taxpayer must furnish a listing of the articles used in this project that were included in the audit.
Exempt Out-of-State Projects
Pursuant to §58.1-610.F of the Code of Virginia, the department will further revise its audit, provided that the taxpayer (1) identifies the projects in question, (2) substantiates that property stored in Virginia in connection with the projects could have been purchased exempt from the tax in the states where the property was installed, and (3) separately identifies the articles used in each project that were included in the audit.
The additional information required for the revision of this audit should be furnished to the department's Technical Services Section at P. O. Box 6-L, Richmond, Virginia 23282 within the next 30 days.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner