Tax Type
Retail Sales and Use Tax
Description
Lease of vending machines
Topic
Taxability of Persons and Transactions
Date Issued
10-27-1989
October 27, 1989
Re: Request for Ruling/Sales and Use Tax
Dear**************
This will reply to your letter dated June 19, 1989 in which you request a ruling on the application of the Virginia Retail Sales and Use Tax to one of your lessees located in Virginia.
FACTS
*******(the Company) leases vending machines to a lessee in Virginia. Currently, the Company is charging the lessee sales tax on the monthly lease payments, yet the lessee contends that since he pays taxes on the product sold from the machine he is exempt from the taxes charged by the Company. The Company requests to know if it is correct in collecting the sales tax from the lessee.
DETERMINATION
Virginia Retail Sales and Use Tax Regulation 630-10-57 (copy enclosed) provides that "a lessor of tangible personal property whose place of business is outside this state and who leases or rents tangible personal property to Virginia customers is required to register as a dealer and to collect and pay the tax on the gross proceeds. Generally, the tax applies to leases or rentals of machinery and equipment which is leased or rented without an operator."
Additionally, VR 630-10-110 4 (copy enclosed) requires that dealers not engaged in the business of placing vending machines but who use vending machines at their places of business to sell merchandise, such as the Company's lessee, must report the tax at the rate of 4.5% of gross taxable sales.
While the Company's lessee may purchase products for resale through vending machines exempt from the tax under Form ST-10 and report the tax on gross taxable sales, all tangible personal property for use or consumption by the lessee and not for resale, including vending machines, are subject to the tax.
Thus, the Company is correct in charging the lessee sales tax on the monthly lease payments.
If you have any further questions regarding this matter, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner