Tax Type
Retail Sales and Use Tax
Description
Modular home manufacturer; Prefabricated house sections
Topic
Taxability of Persons and Transactions
Date Issued
12-20-1989
December 20, 1989
Re: Ruling Request/ Virginia Sales and Use Tax
Dear*****************
This will reply to your letter dated November 1, 1989 in which you request a ruling for Virginia Sales and Use Tax.
FACTS
You represent a New Jersey corporation (taxpayer) which is engaged in manufacturing of modular homes. The homes are assembled in a warehouse into two or more units and then placed on a truck for delivery to a builder or consumer in Virginia to be affixed to real estate.
The taxpayer requests clarification of the Virginia sales and use tax regulations on the following points:
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- 1. Whether the modular units are considered to be tangible personal property prior to the installation of the units on a lot.
2. Whether the corporation is considered a manufacturer for the purpose of purchasing materials on a tax exempt basis.
3. Collection and payment of the sales and use tax when the units are sold to a builder for resale to the ultimate user.
4. Collection and payment of the sales and use tax if the corporation sells the modular homes directly to the ultimate user.
- 1. Whether the modular units are considered to be tangible personal property prior to the installation of the units on a lot.
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- 5. Application of the Use tax to the aforementioned situations.
- 5. Application of the Use tax to the aforementioned situations.
RULING
In accordance with Virginia Regulation 630-10-84.1, sales of prefabricated modular house sections or units by manufacturers without installation are sales of tangible personal property that are subject to the Virginia sales and use tax. If the taxpayer is not authorized to collect the tax or fails to collect the tax, the purchaser (the builder) must remit the tax directly to the Department of Taxation on Form ST-7, Consumer's Use Tax Return.
A builder who purchases and installs the modular unit for a customer will not be entitled to the resale exemption. Inasmuch as the unit loses its identity as tangible personal property and becomes real property upon installation the builder is deemed to be the consumer of the material under Virginia Regulation 630-10-27 (enclosed) for purposes of applying the tax.
The taxpayer itself will be deemed the taxable user or consumer of any modular home which it erects or contracts to erect in Virginia. In such an event, the tax is computed based on the primary purpose rule set out in Virginia Regulation 630-10-27(E).
The taxpayer is entitled to purchase raw materials, component parts, and other tangible personal property to be fabricated for sale under the industrial manufacturing exemption provided that more than one half its production consists of units to be sold to builders or other consumers.
I hope the foregoing information has answered your questions. However, please contact the department if you need additional information.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner