Tax Type
Retail Sales and Use Tax
Description
Construction; Subcontractors
Topic
Taxability of Persons and Transactions
Date Issued
06-28-1996
June 28, 1996
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear*********
This is in reply to your letter in which you seek correction of a retail sales and use tax assessment issued to ******* (the "Taxpayer") for the period January 1990 through July 1994. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer is a construction contractor. An audit by the department resulted in an assessment for untaxed purchases. You contend that several invoices held taxable in the audit were for subcontract work that was performed and the subcontractors should be responsible for the tax. The auditor reviewed the invoices and removed those he believed were related to contract jobs. The remaining invoices were deemed retail sales to the Taxpayer and tax assessed. You request a reconsideration of the auditor's findings.
DETERMINATION
Code of Virginia § 58.1-610(A) provides that a person who contracts to perform construction, reconstruction, installation, repair, or any other service with respect to real estate or fixtures thereon and who furnishes tangible personal property is deemed to have purchased the tangible personal property for use or consumption. Virginia Regulation (VR) 630-10-27(A) further provides that "the law treats every contractor as the user or consumer of all tangible personal property [which becomes real property upon installation] furnished to him or by him in connection with real property construction, reconstruction, installation, repair, and similar contracts."
The invoices submitted by the Taxpayer do not support its contention that the subcontractors should have been responsible for the tax as the using and consuming contractors of the materials. There is nothing to indicate that the materials were purchased by the Taxpayer outside its capacity as a using and consuming contractor. In addition, while the suppliers of the materials may have been qualified subcontractors at the time the sales were made to the Taxpayer, there is no evidence they were acting as subcontractors with respect to the construction projects in which the Taxpayer was the contractor.
Code of Virginia § 58.1-205 provides that an assessment by the department is prima facie correct. The burden is on the taxpayer to prove that an assessment is erroneous. In this case, the Taxpayer has not provided sufficient information to prove the assessment is incorrect. Accordingly, there is no basis for revision and the assessment is correct as issued.
Please remit a check in the amount of******tax and interest accrued through the date of assessment, plus******* , the remaining balance on the uncontested portion of the assessment) to the department's Office of Tax Policy, P. O. Box 1880, Richmond, Virginia 23218-1880.
If you have any questions regarding this matter, you may contact******* at ******** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9208F
Rulings of the Tax Commissioner