Sales Tax State Activity Update - November 2004

Out-of-State Contractor not a Fabricator in Virginia

An out-of-state contractor was assessed use tax on contract labor charges to fabricate steel items for Virginia construction contracts. The contractor installs custom steel gates, stairs, railing and fencing pursuant to construction contracts in Virginia. The contractor purchases and furnishes the materials for the jobs to out-of-state subcontractors who fabricate the materials into steel items for the contractor and ship them directly to the contractor’s Virginia job locations.

The Virginia Department of Revenue’s position is that only fabrication labor performed by construction contractors exclusively for their use or consumption is not subject to sales and use tax. The contractor argues the fabricated items are not tangible personal property because they have no value until they are installed at the job site. Tangible personal property is defined at that which may be seen, weighed, measured, felt, or touched, or is in any other manner perceptible to the senses. Contract labor services were performed by someone other than the contractor (i.e. subcontractors) and the items qualified as tangible personal property therefore it was determined that use tax was properly assessed.

The full text is available at: http://policylibrary.tax.state.va.us/OTP/Policy.nsf

(Virginia Tax Commission Ruling 04-158, September 30, 2004)

---

Subscribe to CyberTax News and receive the latest indirect tax news, including rate changes, rule updates, compliance issues, and more, delivered directly to your email.

Email Address