Tax Type
Retail Sales and Use Tax
Description
Repair services; Computer maintenance contract
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
02-08-1985
February 8,1985
Re: Request for Ruling/Sales and Use Tax
Dear *************
This will reply to your letter of December 18, 1984 requesting a ruling on the correct application of the sales and use tax to the maintenance contract between ******** and *********.
§630-10-62.1 of the Virginia Sales and Use Tax Regulations defines "maintenance contract" as "any agreement whereby a person agrees to maintain and/or repair an item of tangible personal property over a specified period of time for a fee which is determined at the time the agreement is entered into." The regulations state further that, "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 since at the time the contract is entered into, it is impossible to ascertain what portion of future repair transactions will represent parts and what portion will represent labor."
Under the terms of the maintenance contract as described in your letter, the total monthly charge for repair and maintenance must be considered a taxable sale despite the fact that the equipment being repaired is also leased from your maintenance contractor. So long as the computer equipment being repaired is located in Virginia and ***** is enjoying the benefits of the use of such computer equipment and services, it remains subject to the Virginia Sales and Use tax law.
I hope that this will answer your question; however, feel free to contact the department if further questions arise.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner