Tax Type
Retail Sales and Use Tax
Description
Portable toilet leases with pumping and cleaning charges
Topic
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
03-09-2001
March 9, 2001
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear
This is in reply to your letter in which you seek correction of the department's retail sales and use tax audit assessment issued to **** (the "Taxpayer"), for the period October 1996 through September 1999. I apologize for the delay in the department's response.
FACTS
The Taxpayer leases portable chemical toilets to customers. The department's audit disclosed that the Taxpayer was leasing toilets inclusive of pumping and cleaning services. The Taxpayer contests the assessment of tax on the service portion of the transaction, which the Taxpayer states is invoiced separately. The Taxpayer contends that the services rendered are exempt under Title 23 of the Virginia Administrative Code (VAC) 10-210-4040(C) as personal or professional service transactions. Accordingly, the Taxpayer seeks a waiver of the balance of the assessment.
DETERMINATION
Code of Virginia § 58.1-603(2), copy enclosed, 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 B of Title 23 of the Virginia Administrative Code (VAC) 10-210-840, copy enclosed, 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."
Additionally, Code of Virginia § 58.1-609.5(1), and Title 23 VAC 10-210-4040 exempt from the sales and use tax professional and personal service transactions which involve sales as inconsequential elements for which no separate charges are made. When determining whether a particular transaction involving both the sale of tangible personal property and the provision of a service represents a sale of tangible personal property or an exempt service, the "true object" test is used. Title 23 VAC 10-210-4040(D) also states "[i]f the object of the transaction is to secure a service and the tangible personal property which is transferred to the customer is not critical to the transaction, then the transaction may constitute an exempt service."
It has been the longstanding policy of the department to treat the lease or rental of portable toilets as a taxable transaction. See Public Document (P.D.) 91-275 (10/28/91), copy enclosed. Based on the information presented by the Taxpayer, the "true object" of the portable toilet operation is the provision of tangible personal property. The pumping charges in the portable toilet operation are a part of the gross proceeds received from the rental of tangible personal property. For this reason, the sales tax assessed in the audit is correct, and remains due and payable.
Please return your payment for the balance of tax and interest totaling $** to the department's Office of Tax Policy, Post Office Box 1880, Richmond, Virginia 23218-1880, within 30 days from the date of this letter. If payment is not received within that time, interest will accrue on the balance due from the original date of assessment.
If you should have any questions regarding this matter, please contact **** of the department's Office of Tax Policy at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/27858Q
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear
This is in reply to your letter in which you seek correction of the department's retail sales and use tax audit assessment issued to **** (the "Taxpayer"), for the period October 1996 through September 1999. I apologize for the delay in the department's response.
FACTS
The Taxpayer leases portable chemical toilets to customers. The department's audit disclosed that the Taxpayer was leasing toilets inclusive of pumping and cleaning services. The Taxpayer contests the assessment of tax on the service portion of the transaction, which the Taxpayer states is invoiced separately. The Taxpayer contends that the services rendered are exempt under Title 23 of the Virginia Administrative Code (VAC) 10-210-4040(C) as personal or professional service transactions. Accordingly, the Taxpayer seeks a waiver of the balance of the assessment.
DETERMINATION
Code of Virginia § 58.1-603(2), copy enclosed, 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 B of Title 23 of the Virginia Administrative Code (VAC) 10-210-840, copy enclosed, 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."
Additionally, Code of Virginia § 58.1-609.5(1), and Title 23 VAC 10-210-4040 exempt from the sales and use tax professional and personal service transactions which involve sales as inconsequential elements for which no separate charges are made. When determining whether a particular transaction involving both the sale of tangible personal property and the provision of a service represents a sale of tangible personal property or an exempt service, the "true object" test is used. Title 23 VAC 10-210-4040(D) also states "[i]f the object of the transaction is to secure a service and the tangible personal property which is transferred to the customer is not critical to the transaction, then the transaction may constitute an exempt service."
It has been the longstanding policy of the department to treat the lease or rental of portable toilets as a taxable transaction. See Public Document (P.D.) 91-275 (10/28/91), copy enclosed. Based on the information presented by the Taxpayer, the "true object" of the portable toilet operation is the provision of tangible personal property. The pumping charges in the portable toilet operation are a part of the gross proceeds received from the rental of tangible personal property. For this reason, the sales tax assessed in the audit is correct, and remains due and payable.
Please return your payment for the balance of tax and interest totaling $** to the department's Office of Tax Policy, Post Office Box 1880, Richmond, Virginia 23218-1880, within 30 days from the date of this letter. If payment is not received within that time, interest will accrue on the balance due from the original date of assessment.
If you should have any questions regarding this matter, please contact **** of the department's Office of Tax Policy at ****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/27858Q
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