Tax Type
Retail Sales and Use Tax
Description
Services; repair and installation; Installation of workstations
Topic
Taxability of Persons and Transactions
Date Issued
01-20-1998
January 20, 1998
Dear********:
This will reply to your letter in which you seek the correction of an assessment issued to ***** (the "Taxpayer'), for the period June 1994 through April 1997.
FACTS
The Taxpayer sells and installs office furniture and workstations. An audit by the department resulted in an assessment for untaxed sales. The Taxpayer maintains that the assessment on some of the sales is erroneous. A group of the contested sales consists of charges for installation labor made in connection with sales of workstations. The auditor held the charges taxable based on information that charges for assembling the workstations were included in the installation charges. Since the charges were not separately stated, the entire amount was held taxable. The Taxpayer maintains that it did not assemble the workstations; the invoice charges were for installation only.
The Taxpayer also states that a second group of sales consists of charges for labor only and there were no sales of tangible personal property made in connection with the labor charges invoiced. The labor charges were for reconfiguring office areas by dismantling, moving, and reinstalling existing workstations and furniture. The Taxpayer also seeks the removal of one sale from the audit based on an exemption certificate from one of its customers that it has provided. The last sale in dispute concerns a labor charge for the repair of a chair. The Taxpayer has provided an invoice showing a separate charge for repair labor of $20.00.
DETERMINATION
Generally, charges for services provided in connection with the sale of tangible personal property are taxable. However, Code of Virginia Sec. 58.1-609.5(2) (copy enclosed) allows an exemption from sales and use tax for "[a]n amount separately stated for labor or services rendered in installing, applying, remodeling or repairing property sold.' Bearing this in mind, I will address the issues raised in the Taxpayer's letter.
Assembly vs. Installation
Black's Law Dictionary (1995) defines "install' as "[t]o set up or fix in position for use or service.' When the Taxpayer receives the workstation panels from the manufacturer, the panels are ready to be installed. There is no assembly performed by the Taxpayer, nor is it needed, prior to installation of the panels. The finished panels are set in place and connected to create a workstation. Desktops, file cabinets, light fixtures, and similar items are then attached to the workstation, which is then ready for use by the customer. Based on the information provided by the Taxpayer, I agree that the Taxpayer is merely performing installation services in connection with the sale of workstations to its customers. The charges for installation labor will be removed from the audit.
Charges for Labor Only
Code of Virginia Sec. 58.1-609.5(1) exempts from the tax "[p]rofessional, insurance, or personal service transactions which involve sales as inconsequential elements for which no separate charges are made, nor services rendered by repairmen for which a separate charge is made.' The information provided by the Taxpayer indicates there were no sales of tangible personal property made in connection with labor charges to move, install, and reconfigure office workstations and furniture. These charges were for professional services and will be removed from the audit.
Repair Labor
The auditor held the total charge for the repair of a chair taxable in the audit. The Taxpayer has provided a copy of the invoice for this transaction which shows a separate $20.00 charge for repair labor. Separately stated charges for repair labor are exempt under Code of Virginia Sec. 58.1-609.5(2). The amount of this sale will be reduced by $20.00 to remove the repair labor.
Exempt Sale
The Taxpayer has provided an exemption certificate, Form ST-12, to document its claim that one of the sales held in the audit is exempt. My review of the certificate confirms that the customer that issued the certificate is exempt from sales and use tax under Code of Virginia Sec. 58.1-609.1(4). The sale will be removed from the audit.
The assessment has been revised, leaving a balance remaining of ***** tax and ***** interest. You may send your payment of ***** to the attention of ***** in the Office of Tax Policy, P. O. Box 1880, Richmond, Virginia 23218-1880. If you have any questions, please contact ***** at *****.
Rulings of the Tax Commissioner