Tax Type
Retail Sales and Use Tax
Description
Taxpayer sells and leases traffic control equipment to road construction contractors.
Topic
Exemptions
Taxable Transactions
Date Issued
08-17-2007
August 17, 2007
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This will reply to your letter in which you request a ruling regarding the application of the retail sales and use tax to the lease of traffic control equipment by ***** (the "Taxpayer"). I apologize for the delay in responding to your letter.
FACTS
The Taxpayer sells and leases traffic control equipment such as traffic barrels, cones, signs, barricades, directional target arrows and other similar traffic control equipment to road construction contractors. The Taxpayer bills its customers lease charges on the individual equipment, as well as a set-up charge for lane closure equipment, and a pick-up charge. In addition, the Taxpayer may be required to remain with the equipment as the construction project progresses and in this instance the customer is charged a maintaining charge.
RULING
Virginia Code § 58.1-603 2 imposes the sales tax on the "gross proceeds derived from the lease or rental of tangible personal property, where the lease or rental of such property is an established business, or part of an established business, or the same is incidental or germane to such business."
The term "gross proceeds" is defined in Va. Code § 58.1-602 as "the charges made or voluntary contributions received for the lease or rental of tangible personal property or for furnishing services, computed with the same deductions, where applicable, as for sales price as defined in this section over the term of the lease, rental, service, or use, but not less frequently than monthly." Title 23 of the Virginia Administrative Code (VAC) 10-210-840 B further provides that gross proceeds also include any service charges in connection with the lease of property.
As the foregoing demonstrates, any service charges in connection with the lease of property are considered gross proceeds, and are therefore subject to the retail sales and use tax. In the Taxpayer's instance, the set-up charge and maintaining charges are taxable as part of the gross proceeds of the lease of the traffic control equipment.
Notwithstanding the above, the delivery charges imposed by the Taxpayer are exempt from the retail sales and use tax provided such charges are separately stated on the invoice to the customer. See Va. Code § 58.1-609.5 3 and Title 23 VAC 10-210-6000 A, which address exempt delivery charges. In addition, separately stated transportation charges made for picking up leased or rented property are exempt from the tax. See Public Document 94-7 (1/7/94) and Tax Bulletin 95-7 (9/27/95).
This response is based on the facts provided as summarized above. Any change in the facts or the introduction of new facts may lead to a different result.
The Code of Virginia sections, regulation, tax bulletin and public document cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website. If you have any questions about this ruling, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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Janie E. Bowen
Tax Commissioner
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AR/1-954082759i
Rulings of the Tax Commissioner