Tax Type
Retail Sales and Use Tax
Description
Utilities; Propane tank rentals
Topic
Taxability of Persons and Transactions
Date Issued
03-31-2000
March 31, 2000
Re: Ruling Request: Retail Sales and Use Tax
Dear ****
This is in response to your letter of January 31, 2000, requesting a ruling regarding the application of the retail sales and use tax to propane tank rentals. Copies of cited sources are enclosed.
FACTS
****** (the Taxpayer) indicates that its previous accounting software could not show a separate amount for sales tax on propane tank rental charges. In such instances, the Taxpayer would impute the sales tax based on the number of rentals and remit the tax to the department. Using new accounting software, the Taxpayer is now able to show the amount of sales tax charged on propane tank rentals on customer invoices. Since this billing change, the Taxpayer has received complaints from customers claiming that the sales tax on propane tank rentals is unlawful.
RULING
Code of Virginia § 58.1-603(2) imposes the retail sales and use tax on "the gross proceeds derived from the lease or rental of tangible personal property." Interpreting this law, subsection A of Title 23 of the Virginia Administrative Code (VAC) 10-210-840 requires that "[a]ny person engaged in the business of leasing or renting tangible personal property to others is required to register as a dealer and collect and pay the tax on gross proceeds." Subsection B of this regulation defines "gross proceeds" as "charges made . . . for the lease or rental of tangible personal property" and further provides that:
Gross proceeds also includes any service charges in connection with the lease of property. For example, if a dealer leases a gas cylinder and in connection with such lease also imposes a $10 "demurrage" charge because the customer fails to return the cylinder within the allotted time, the $10 charge will also be subject to the tax. (Emphasis added.)
As the foregoing clearly demonstrates, leases of gas cylinders are taxable. Similarly, charges for the lease or rental of propane tanks are subject to taxation. Although charges for propane gas sold for domestic consumption are exempt from the state sales and use tax pursuant to Code of Virginia § 58.1-609.10(1) and 23 VAC 10-210-630, such exemption does not extend to propane tank rental charges. Moreover, there is no statutory exemption for propane tanks rented or leased by individuals. Accordingly, the charge for the rental or lease of propane tanks is taxable.
If you have any questions about this response, please contact **** of my Tax Policy staff at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/26863R
Re: Ruling Request: Retail Sales and Use Tax
Dear ****
This is in response to your letter of January 31, 2000, requesting a ruling regarding the application of the retail sales and use tax to propane tank rentals. Copies of cited sources are enclosed.
FACTS
****** (the Taxpayer) indicates that its previous accounting software could not show a separate amount for sales tax on propane tank rental charges. In such instances, the Taxpayer would impute the sales tax based on the number of rentals and remit the tax to the department. Using new accounting software, the Taxpayer is now able to show the amount of sales tax charged on propane tank rentals on customer invoices. Since this billing change, the Taxpayer has received complaints from customers claiming that the sales tax on propane tank rentals is unlawful.
RULING
Code of Virginia § 58.1-603(2) imposes the retail sales and use tax on "the gross proceeds derived from the lease or rental of tangible personal property." Interpreting this law, subsection A of Title 23 of the Virginia Administrative Code (VAC) 10-210-840 requires that "[a]ny person engaged in the business of leasing or renting tangible personal property to others is required to register as a dealer and collect and pay the tax on gross proceeds." Subsection B of this regulation defines "gross proceeds" as "charges made . . . for the lease or rental of tangible personal property" and further provides that:
Gross proceeds also includes any service charges in connection with the lease of property. For example, if a dealer leases a gas cylinder and in connection with such lease also imposes a $10 "demurrage" charge because the customer fails to return the cylinder within the allotted time, the $10 charge will also be subject to the tax. (Emphasis added.)
As the foregoing clearly demonstrates, leases of gas cylinders are taxable. Similarly, charges for the lease or rental of propane tanks are subject to taxation. Although charges for propane gas sold for domestic consumption are exempt from the state sales and use tax pursuant to Code of Virginia § 58.1-609.10(1) and 23 VAC 10-210-630, such exemption does not extend to propane tank rental charges. Moreover, there is no statutory exemption for propane tanks rented or leased by individuals. Accordingly, the charge for the rental or lease of propane tanks is taxable.
If you have any questions about this response, please contact **** of my Tax Policy staff at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/26863R
Rulings of the Tax Commissioner