Tax Type
Retail Sales and Use Tax
Description
Antennas leased to federal government
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
05-12-1988
May 12, 1988
Re: Ruling Request/ Sales and Use Tax
Dear*****************
This will reply to your letter of August 10, 1987 seeking a ruling on behalf of *****(taxpayer), on the application of the sales and use tax to the taxpayers purchase for subsequent installation and lease in Virginia of equipment to an agency of the federal government (government). This also has reference to information you have provided in telephone conversations with a member of my staff. We apologize for the delay in providing you with this response.
FACTS
According to your letter, the taxpayer plans to purchase satellite communications equipment, consisting of 2.4 meter antennae, for installation and lease to the government on government property located within this State. The antennae are to be shipped directly from the manufacturer to the government property where it will then be installed by the taxpayer. Once installed, the antennae will provide the government with point-to-point data circuits. It is our understanding that the taxpayer is merely leasing this equipment to the government, and is not providing any telecommunication services in connection with such leases. The equipment lease may be terminated at any time by the government, at which time all equipment will be removed by the taxpayer.
You ask what if any taxes will apply to your purchase and installation of the satellite communications equipment and subsequent lease of the equipment to the government.
RULING
Virginia Code §58.1-603 imposes the sales tax on the "gross sales price of each item or article of tangible personal property when sold at retail or distributed in this State." The term "sale" is then defined in §58.1-602(16) as, "any transfer of title or possession, or both, exchange, barter, lease or rental, ... in any manner or by any means whatsoever, of tangible personal property..."
However, §58.1-602(14) of the Code defines the term "sale at retail" to mean a sale to any person for any purpose other than for resale in the form of tangible personal property..."
Based on the information provided, since the taxpayer in this case is purchasing the antennae exclusively for lease to the government, it may purchase the antennae exempt of the tax pursuant to resale certificate of exemption Form ST-10, a copy of which is enclosed.
Moreover, Virginia Code §58.1-608(18) provides an exemption from the sales and use tax for "[t]angible personal property for use or consumption by the Commonwealth, any political subdivision of the Commonwealth, or the United States." Virginia Retail Sales and Use Tax Regulation (VR) 630-10-45, copy enclosed, then explains that this exemption applies to, "sales to the United States if the purchases are pursuant to required official purchase orders to be paid out of public funds. The tax applies when such sales are made without the required purchase orders and are not paid for out of public funds." (Emphasis added)
Therefore, the taxpayer's gross proceeds from the leases of antennae in this case will qualify for the governmental exemption if the leases are pursuant to official government purchase orders and paid for out of public funds.
Lastly, the department is not aware of any exemption which the taxpayer might enjoy from local personal property taxation on the equipment being leased. However, the taxpayer may wish to contact local officials in the localities in which it intends to lease the equipment for further information.
I hope that the foregoing has responded to your questions but let the department know if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner