Tax Type
BPOL Tax
Local Taxes
Property Tax
Description
Vehicles for Rent
Topic
Exemptions
Local Power to Tax
Local Taxes Discussion
Property Subject to Tax
Date Issued
09-04-1984
[Opinion - Virginia Attorney General: 1984 at 224]
REQUEST BY: Honorable Geraldine M. Whiting Commissioner of the Revenue for Arlington County
OPINION BY: Gerald L. Baliles, Attorney General
OPINION:
This is in reply to your request for my opinion on the following matter:
"When a vehicle is owned by a leasing company, leased to a daily rental company and then used for daily rentals:
a. Is the leasing company liable to the jurisdiction in which the vehicle is located for the personal property tax?
b. Is the daily rental company liable for the 2% gross receipts tax on the vehicles rented [even though] a personal property tax has been paid?"
In 1981, the General Assembly enacted amendments to Title 58 of the Code of Virginia that reclassified "daily rental passenger cars" for the purpose of local taxation. See Ch. 145, Acts of Assembly of 1981. The amendments removed "daily rental passenger cars" from the ambit of local taxation as tangible personal property and reclassified them as merchants' capital, a classification of intangible personal property. Thus, daily rental passenger cars are taxed to their owner not as tangible personal property but as merchants' capital.1 See §§ 58-20, 58-405 and 58-833. The legislation also imposed an additional two percent tax on the gross proceeds from the rental of daily rental passenger cars under the Virginia Motor Vehicle Sales and Use Tax Act, and provided for the distribution of this additional tax to the localities in which the vehicles were rented. See §§ 58-685.12:1(A) and 58-685.23(ii).
The General Assembly has divided persons or companies who lease automobiles to other parties into two distinct categories. One is referred to as a "rentor" and the other as a "lessor." Rentors lease cars to others for periods not to exceed twelve months. § 58-685.11(7). By implication, lessors are those who lease to others for periods exceeding twelve months. Id. §58-685.17:1 requires all rentors of motor vehicles in Virginia to obtain a rentor's certificate of registration or license from the Commissioner of the Division of Motor Vehicles for each place of rental business within the Commonwealth. The special tax distribution provisions of § 58-685.23(ii) apply only to daily rental passenger cars that are "held for rental" by such licensed rentors engaged in the business of renting automobiles. See §§ 58-685.12:1(B) and 58-685.11(7).
In answer to your first question, because the automobiles owned and leased by the leasing company are daily rental passenger cars classified as merchants' capital within the meaning of §§ 58-685.12:1 and 58-833, I am of the opinion that the leasing company would be liable to the jurisdiction in which the vehicle is located for the merchants' capital tax but not the tangible personal property tax.2
In answer to your second question, I am of the opinion that the daily rental company would be liable for the two percent gross receipts tax on the vehicles rented in addition to the merchants' capital tax which has been paid on the vehicles by the leasing company. Under the provisions of § 58-685.12:1, the additional two percent gross receipts tax is imposed on any daily rental passenger car that is "held for rental" by licensed rentors engaged in the business of renting automobiles. In view of the fact that the merchants' capital tax is separate and distinct from the tangible personal property tax, the credit which is authorized by § 58-685.20(B) for tangible personal property tax assessed may not be claimed against the additional two percent gross receipts tax imposed by § 58-685.12:1.3
1 This Opinion later concludes that the owner to which the vehicles will be taxed as merchants' capital is the leasing company. The leasing company is not a merchant. This unusual result suggests that the General Assembly may not have contemplated the impact of Ch. 145, Acts of Assembly of 1981, on the type of factual situation presented by you. It would appear that the legislation assumes that the entity in the daily rental passenger car business is also the owner of the vehicles.
2 Of course, if Arlington County imposes a license tax on merchants, it may not also impose the merchants' capital tax. See § 58-266.1(A)(5). In that case, neither merchants' capital tax nor tangible personal property tax is owed by the leasing company.
3 The reference in § 58-685.20(B) to a credit for tangible personal property taxes assessed on a daily rental passenger car is principally a transitional provision for the 1981 tax year when daily rental passenger cars were reclassified by the General Assembly from tangible personal property to merchants' capital, effective July 1, 1981, but where tangible personal property tax may have been assessed against the vehicle before July 1, 1981.
Attorney General's Opinion