Tax Type
Retail Sales and Use Tax
Description
Computer service and maintenance agreements
Topic
Taxability of Persons and Transactions
Date Issued
06-26-1985
June 26, 1985
Re: §58-1118 Application/Sales and Use Tax
Dear ****
This will refer to my determination of November 21, 1983 in the above referenced matter.
It was felt in my determination that the computer maintenance and service agreements entered into with ***** by your client were exempt from the sales and use tax. As inferred by my letter, the department has consistently deemed such agreements to be tax-exempt when entered into solely for the provision of repair service. However, a re-examination of the agreement between your client and ***** reveals that ***** will provide repair services and parts when necessary in fulfillment of its maintenance contract. The sales and use tax treatment of such agreements is set forth in Section 630-10-62.1 of the Virginia Retail Sales and Use Tax Regulations, which states:
Maintenance contracts, the terms of which provide both repair or replacement parts and repair labor, represent a sale of tangible personal property. The total charge for such contracts is subject to the tax...
Based upon the foregoing, I must revise my determination of November 21, 1983 and find that the maintenance and service agreements purchased by your client from ***** were indeed subject to the sales and use tax. Of course, your client will not be held liable for any tax on its agreements with ***** for the period between November 21, 1983 and today, but prospective compliance will be expected. Please pardon us for any inconvenience caused your client by our oversight.
Sincerely,
W . H. Forst
Tax Commissioner
Re: §58-1118 Application/Sales and Use Tax
Dear ****
This will refer to my determination of November 21, 1983 in the above referenced matter.
It was felt in my determination that the computer maintenance and service agreements entered into with ***** by your client were exempt from the sales and use tax. As inferred by my letter, the department has consistently deemed such agreements to be tax-exempt when entered into solely for the provision of repair service. However, a re-examination of the agreement between your client and ***** reveals that ***** will provide repair services and parts when necessary in fulfillment of its maintenance contract. The sales and use tax treatment of such agreements is set forth in Section 630-10-62.1 of the Virginia Retail Sales and Use Tax Regulations, which states:
Maintenance contracts, the terms of which provide both repair or replacement parts and repair labor, represent a sale of tangible personal property. The total charge for such contracts is subject to the tax...
Based upon the foregoing, I must revise my determination of November 21, 1983 and find that the maintenance and service agreements purchased by your client from ***** were indeed subject to the sales and use tax. Of course, your client will not be held liable for any tax on its agreements with ***** for the period between November 21, 1983 and today, but prospective compliance will be expected. Please pardon us for any inconvenience caused your client by our oversight.
Sincerely,
W . H. Forst
Tax Commissioner
Rulings of the Tax Commissioner