Tax Type
Local Taxes
Description
Merchants' capital tax
Topic
Local Taxes Discussion
Date Issued
10-10-1984
October 10, 1984
Re: Merchants' Capital Tax Liability
Dear *******
This letter is in answer to your request for an interpretation regarding the merchants' capital tax liability in connection with motor vehicle leasing.
FACTS
Taxpayer is a wholly-owned subsidiary of a state-chartered bank incorporated under Delaware law. Taxpayer will engage in long-term motor vehicle leasing. The leasing program will be structured so an independent servicing company will solicit dealers and independent leasing companies in Virginia to handle consumer contact. These independent dealers and leasing companies will arrange the terms of the leases based on guidelines provided by Taxpayer. Once an application is completed, final approval will be made by Taxpayer. Following approval, the independent dealer or leasing company will purchase vehicle to be leased and prepare the contract and other forms, including motor vehicle registration and title applications. The vehicle will always be titled in the name of Taxpayer. Once the vehicle is delivered to consumer and lease is signed, all rights and interests in the lease and vehicle will be assigned to Taxpayer and Taxpayer will make a full payment to dealer for purchase of vehicle. Taxpayer assumes responsibility for billing and collecting payments and handling all accounting and records. Taxpayer is legal owner of vehicle and will be responsible for insuring that proper insurance coverage is maintained by lessee. At no time will Taxpayer own vehicles not being leased to consumer. Taxpayer will not have any business location in Virginia and will operate through independent dealers and leasing companies. Taxpayer's personnel may periodically enter Virginia to monitor business activity.
You request an interpretation from the Department regarding Taxpayer's taxability under merchants' capital, § 58-833, Code of Virginia.
CONCLUSION
Your inquiry concerns a local tax matter. However, it is my view, on the basis of data furnished and summarized herein, Taxpayer's automobiles used in the leasing business are not subject to merchants' capital tax. Under the business procedures you outlined, the vehicles appear to be subject to tangible personal property taxes in localities where the property is physically located and Taxpayer's income may be subject to Virginia income tax since Taxpayer has property in Virginia.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner