Tax Type
Aircraft Sales and Use Tax
Description
Lease or rental
Topic
Property Subject to Tax
Date Issued
09-25-1984
- September 25, 1984
Re: Section 58-1118-
- Aircraft Sales and Use Tax
Dear ****
This is in response to your application for correction under Section 58-1118, Code of Virginia and supplemental information submitted.
FACTS
Taxpayer is an Alabama corporation who leases a helicopter from another corporation. Taxpayer's lease meets the qualifications of a sale for Virginia aircraft sales and use tax purposes. Semi-annual rental payments made by taxpayer to lessor include an Alabama rental tax of $****. Under the terms of the lease, taxpayer will pay a total of $***** for the lease of the helicopter, including rental tax. Taxpayer is using the leased helicopter in Virginia and licensed the helicopter with the Virginia Division of Aviation.
The Department assessed and taxpayer paid $***** Virginia aircraft use tax on the total lease payments of*****. The Department did not permit credit for the Alabama rental tax assessed upon the total lease payments.
Taxpayer contends that the assessed value of the aircraft for Virginia aircraft use tax purposes should be***** the lessor's purchase price and that the Alabama rental tax of $***** should be credited against the Virginia use tax.
DETERMINATION
For purposes of Virginia aircraft sales and use tax, "sale" includes the lease or rental of an aircraft for a period of time substantially equal to the remaining life of the aircraft as determined at the beginning of the lease term. "Sale" also includes a lease or rental in which payments are equal to or exceed eighty percent of the value of the aircraft. Taxpayer's lease agreement meets the definition of a sale and the total lease payments represent taxpayer's value of the aircraft.
The Department considered the value of the aircraft to be the total lease payments required to be paid by taxpayer under lease agreement. Taxpayer contends that the lessor's purchase price should be the taxable value of the helicopter for Virginia aircraft use tax purposes and not the total lease payments paid. The lessor's purchase price of the aircraft represents cost and not sales price to taxpayer. For purposes of the aircraft use tax, the total lease payments required under the agreement must be considered the sales price and any further adjustment in sales price is denied.
Taxpayer also requests that the Alabama rental tax paid on the lease payments be allowed as a credit against the Virginia aircraft use tax. It is my understanding that the Alabama tax is paid by the seller but the seller is required to add the tax to the sales price and collect the tax from the customer. Since the tax is required to be collected from Taxpayer, such tax will be credited against the Virginia aircraft use tax as provided by Section 58-6 & 5.37, Code of Virginia. In computing the total value of the aircraft for Virginia aircraft sales and use tax purposes, the Department erroneously included the Alabama rental tax. The correct value of the helicopter for Virginia aircraft sales and use tax purposes is $***** with applicable tax of $****. A credit of $**** for the Alabama rental tax, will be permitted against the Virginia aircraft use tax paid. In the near future the Virginia ***** aircraft use tax overpayment of $****, plus applicable interest, will be refunded to you.
Sincerely,
W. H. Forst
State Tax Commissioner -
Rulings of the Tax Commissioner