Tax Type
Retail Sales and Use Tax
Description
Dental Practice: Untaxed Medical Equipment
Topic
Property Subject to Tax
Date Issued
11-28-2001
November 28, 2001
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****
This is in reply to your letter of September 11, 2001, in which you seek correction of a retail sales and use tax audit assessment issued to ***** (the "Taxpayer") for the period June 1995 through May 2001.
FACTS
The Taxpayer operates as a dental office. The only contested issue in this case is the untaxed lease of medical equipment from the Taxpayer to the dental office. The Taxpayer recalls that it was advised in a prior income tax audit that such leases were not taxable. Accordingly, the Taxpayer asks that this issue be reconsidered.
DETERMINATION
Leases of medical equipment
The term "sale" is defined in Code of Virginia § 58.1-602 as "any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property." That same Code section defines "lease" to mean "the leasing or renting of tangible personal property and the possession or use thereof by the lessee or renter for a consideration, without transfer of the title to the property."
Thus, virtually any transaction involving a consideration, including transfers or rentals between businesses that share common ownership, is subject to the sales and use tax unless some specific exemption applies. As the Taxpayer acted in the capacity of lessor and did not collect the sales tax on taxable leases, the lease of the equipment was properly assessed.
The department has previously issued determinations on this issue. For example, see the enclosed Public Documents 93-169 (7/29/93) and 96-369 (12/11/96).
Prior audits
I have reviewed prior audit information but can find no indication that the Taxpayer has previously been audited by the department for income tax purposes. For sales and use tax purposes, the department's records show a prior audit for the period March 1991 through February 1994. This prior sales and use tax audit was based on the department's self-audit program that was in effect at that time. On March 30, 1994, and under that self audit, the Taxpayer submitted a list of untaxed purchases (and some tax overpayments) to the department. Based on that list, and with no further review of the Taxpayer's records, the department issued an assessment on April 6, 1994. That assessment was paid shortly thereafter. A copy of that self-audit is enclosed.
As a result, the department's auditor only reviewed audit data that the Taxpayer provided based on its own interpretation of the sales and use tax laws and regulations. I can find no indication that the Taxpayer's leases of medical equipment was ever addressed in that prior self-audit. Further, and as noted in the enclosed Public Documents, the department's position with respect to such leases has been longstanding and is continually applied in instances where a transaction involving a consideration is not properly subjected to the tax.
Based on this determination, the assessment is correct. A revised bill, with interest accrued to date, will be mailed to the Taxpayer. No additional interest will accrue provided payment is received within 30 days of the date the bill is issued.
If you should have any questions regarding this matter, please contact ***** in the Office of Policy and Administration, Appeals and Rulings, via e-mail at ***** or at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
AR/37124Q
Rulings of the Tax Commissioner