Virginia – Taxpayer Entitled to Use Tax Refund

SALT Report 1642 – The Virginia Department of Taxation issued a ruling regarding a Taxpayer’s request for a use tax refund.  During an audit, the Taxpayer was assessed use tax for floor repairs that were done in his restaurant.  Under Virginia Code § 58.1-610, “any person who contracts orally, in writing, or by purchase order, to perform construction, reconstruction, installation, repair, or any other service with respect to real estate or fixtures… shall be deemed to have purchased such tangible personal property for use or consumption.”
However, Virginia Administrative Code 10-210-410 G states that “persons selling and installing floor coverings that become permanently attached to floors are deemed to be using or consuming contractors with respect to such items.”  Floor coverings included in this are:  carpet, wood block, cork, tile, linoleum, and vinyl when glued, cemented or otherwise permanently attached to floors or plywood and concrete subflooring.
The Taxpayer provided the Department with an invoice from his contractor for the flooring repairs. The invoice indicated that the repair costs include the installation of cement board, water sealant, new tile, and epoxy grout as well as, the cost of removing the existing tile, grout, and drywall.
Based on the description included in the invoice and the cost estimate, the Department concluded that the contractor was providing a repair service to real property and under Virginia tax code contractors that provide these services are subject to tax on all materials and supplies used in the course of the services.
Because the contractor was liable for the tax and the Taxpayer was deemed the purchaser of contracting services, the Taxpayer was granted a request for refund.
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