W. Va. Code R. § 110-15-113

Current through Register Vol. XLI, No. 23, June 7, 2024

Section 110-15-113 - Contractors Who Are Also Retailers

113.1. Special rules apply where contractors are in a dual business which includes reselling to the general public, on a recurring "over-the-counter" basis, the same type of tangible personal property which are used by them in their own contracting activities. A person operating in such a manner is referred to in this rule as a contractor-retailer. A sale by a contractor-retailer of tangible personal property, which does not provide for installation of the merchandise sold is considered a retail sale and is subject to the consumers sales and service tax. Conversely, a sale by a contractor-retailer of tangible personal property which provides for installation of the tangible personal property is generally considered to be contracting and consumers sales and service tax shall be paid by the contractor-retailer based upon the cost of the tangible personal property at the time the tangible personal property is withdrawn from inventory for use in the contracting activity unless the rules set forth in Section 114 apply. Section 114 of these regulations provides special rules for retailers who sell certain types of tangible personal property including incidental installation.

113.2. A contractor-retailer may purchase construction materials, supplies and equipment etc. from vendors free of consumers sales and service tax when the purchase is for resale. When a valid exemption certificate is furnished, the vendor is relieved from the responsibility of collecting the tax if the purchaser has demonstrated that he is a contractor-retailer under the provisions of this rule. The burden of such proof is upon the purchaser.

113.3. The business records of a contractor-retailer must clearly reflect the use made of items purchased and the records must be in such form that the Tax Commissioner can readily determine that the proper consumers sales and use tax liability is being reported and paid.

113.4. The following examples are offered to illustrate the responsibility for paying and remitting consumers sales and service tax under the above rules:

Example 1. ABC Company operates a retail outlet that sells lumber and other building materials and supplies. ABC Company is also a contractor which builds residential and commercial structures. ABC Company would be considered a contractor-retailer and would, therefore, purchase all inventory items for resale. Those items which are used in the performance of a construction contract would be subject to tax in the period they are withdrawn from inventory. The tax would be computed on the cost of the items withdrawn from inventory. Those items which are sold over-the-counter in the retail outlets would be subject to tax at the time of sale. The tax would be computed on the over-the-counter selling price.

Example 2. EFG Company is a mechanical contractor and has no retail outlets. EFG Company rarely sells any of its inventory to other persons or to other contractors. EFG Company would not be considered a contractor-retailer under this rule. However, EFG Company would be considered a contractor and must pay tax to its vendor at the time it purchases any construction materials, supplies, equipment or other tangible personal property. However, on those rare occasions when an inventory item is sold to another person or to another contractor, tax must be collected at the time of sale, therefore, EFG Company should be registered to collect consumers sales and service tax. An adjustment can be made to the consumers sales and service tax reported by taking a credit for tax previously paid on the item sold.

Example 3. Country Construction Company is owned and operated by two individuals in a rural West Virginia community. They do not have a retail outlet but they frequently make sales of building materials which are in their inventory to local residents. Country Construction Company would be a contractor-retailer and could purchase all inventory items for resale. Those items which are used in the performance of a construction contract would be subject to tax in the period they are withdrawn from inventory. The tax would be computed on the cost of the items withdrawn from inventory. Those items which are sold to residents would be subject to the consumers sales and service tax at the time of the sale. The tax would be computed on the selling price of the items.

Example 4. Downhome Construction Company is operated by two individuals in a rural West Virginia community. They do not have a retail outlet and rarely make sales of building materials from their inventory to local residents. Downhome Construction Company would not be considered a contractor-retailer under this rule. Rather, Downhome Construction Company would be considered a contractor and must pay tax to its vendor at the time it purchases any building materials, supplies and equipment. When sales are made to local residents, tax must be collected at the time of sale, therefore, Downhome Construction Company should be registered to collect consumers sales and service tax. However, Downhome Construction Company can adjust its consumers sales and service tax report by taking a credit for tax paid to its vendor on the item sold to the local resident.

W. Va. Code R. § 110-15-113