Tax Type
Retail Sales and Use Tax
Description
Rental payments
Topic
Taxability of Persons and Transactions
Date Issued
11-10-1988
November 10, 1988
Re: Virginia Code §58.1-1821 Application
Retail Sales and Use Tax
Dear****************
This is in reply to your letter of June 4, 1987 in which you provided additional information in regard to the application for correction that you originally submitted on December 8, 1986.
FACTS
As set forth in your letter of June 4, 1987, there are still three remaining areas of the audit that you contest, (1) "worksheet errors", (2) "rental" payments made for heat pumps, and (3) "rental" payments made on a computer. Since these are unrelated issues. I will address each separately.
DETERMINATION
Worksheet Errors
The department has no record of the "Audit Report Analysis" that you reference in your letter of June 4, 1987. However, to the extent that you can document duplicate listings in the department's working papers, such duplicate listings will be removed. The department's ********* District Office will be in contact with you to obtain a copy of your documentation of duplicate listing contained in the audit.
Rental Payments for Heat Pumps
The sales tax is imposed, under Virginia Code §58.1-603, on "the gross proceeds derived from the lease or rental of tangible personal property...." (Emphasis added.) once a heat pump is affixed to realty it loses its identity as tangible personal property; therefore, the lease or rental of the heat pumps installed in motels is not subject to the tax. However, a contractor who installs tangible personal property which loses its identity as tangible personal property and who affixes such tangible personal property to realty is deemed to be the consumer of such property; thus, the taxpayer will be subject to the tax on any purchases of heat pumps during the audit period.
Rental Payments for Computers
You contend that what were characterized as rental payments for the use of a computer, were actually repayments of a loan. To date you have not provided documentation which supports your contention. Until such time as you are able to furnish the department with sufficient documentation (copy of the loan agreement) to demonstrate that the payments were for the repayment of a loan, no adjustment can be made to the audit findings.
Since each of the issues involves questions of a factual nature, I am returning the audit to our Peninsula District office with instructions that they contact you to obtain the necessary information.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner