Sales Tax Articles
Sales Tax State Activity Update - January 2005
Virginia Assessed Contractor Use Tax on Exempt Material
A recent ruling by the Virginia Tax Commissioner upheld a use tax assessment against a taxpayer (i.e. contractor) for an exempt plumbing and HVAC system installed in a new medical facility for a nonprofit hospital. The plumbing and HVAC system were properly purchased tax-exempt by the nonprofit hospital and then transferred to the contractor for installation.
The relevant sales tax statute states, in pertinent part, any person who contracts to perform services in this Commonwealth and is furnished tangible personal property for use under the contract by the person, or his agent or representative, for whom the contract is performed, and a sales or use tax has not been paid to this Commonwealth by the person supplying the tangible personal property, shall be deemed to be the consumer of the tangible personal property so used, and shall pay a use tax based on the fair market value of the tangible personal property so used.
The Tax Commissioner determined that the taxpayer was a contractor for purposes of sales and use tax laws and entered into an agreement to install and furnish the plumbing and HVAC system for the building (i.e. a construction contract). The contractor was properly assessed use tax on materials provided to him for use in a construction contract, by the person for whom the contract was performed, and for which sales and use tax was not paid.
You can view the full text here.
(Virginia Tax Commissioner Ruling No. 04-207, November 30, 2004)
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