Tax Type
Retail Sales and Use Tax
Description
Leases and Rentals; Automatic Blood Pressure Machines
Topic
Taxability of Persons and Transactions
Date Issued
08-04-1992
August 4, 1992
Re: Request for Ruling: Retail Sales and Use Tax
Dear***************
This will reply to your letter of August 9, 1991 in which you request a ruling on the application of the sales and use tax to a three party transaction involving the leasing of equipment in Virginia by *******(the Taxpayer).
FACTS
The Taxpayer, as a manufacturer of automatic blood pressure machines located without Virginia, leases its machines to a retail chain in Virginia. The Taxpayer transfers the rights to its leasing agreements and title to the equipment to a national leasing company. The Taxpayer then provides billing and collection services and forwards the monthly rental payments (including the use tax) to the leasing company for remittance of the tax to Virginia. The Taxpayer would like to continue this arrangement.
The Taxpayer has also contracted to place coin operated blood pressure machines in another retail chain in Virginia. The agreement stipulates that store personnel will be responsible for the installation and operation of the machines as well as collection of the proceeds from the machines. The Taxpayer receives a fifty percent share and the remainder of the proceeds is retained by the chain. The Taxpayer requests a ruling whether its payment from the coin operated machines is subject to the tax.
RULING
Virginia Regulation (VR) 630-10-29.1(e) defines a dealer as every person who "[l]eases or rents tangible personal property for a consideration, permitting the use or possession of such property without transfer of title." Emphasis added.
Additionally, Va. Code §58.1-603 imposes the sales tax on "every person who engages in the business of selling at retail or distributing tangible personal property in this Commonwealth, ... or who leases or rents such property within this Commonwealth, ..."
Subsequent to the transfer of the leasing rights and title to the equipment, the leasing company qualifies as a dealer in Virginia, and as such is required to hold a certificate of registration under Va. Code §58.1-613, collecting and remitting the tax on all Virginia sales and/or leases. The Taxpayer is merely an agent of the leasing company as it provides billing and collection services which are not subject to the tax.
However, under Va. Code §58.1-612(B)(8), in the event that the leasing company fails to remit the tax to the department, then the Taxpayer will be considered a "dealer" whose liability for the tax is identical to that of the leasing company who is a dealer. I have enclosed copies of the above cited code and regulation sections for your reference.
Regarding the second situation, I have enclosed a copy of PD 91-98 (6/3/91) which discusses circumstances similar to those presented in this second scenario. Accordingly, tangible personal property placed in a business by a third party for purposes of providing a service to the general public and operated and maintained on a daily basis by the owner and/or the employees of that business constitutes a lease of tangible personal property. Review of the written agreement acknowledges an "underlying lease" arrangement which provides for the exchange of automatic blood pressure machines. The payments from the owner of the business to the Taxpayer are for rental of the equipment, and as such, are subject to the sales and use tax. Furthermore, blood pressure machines are medical devices used in providing a service and therefore the charge to the general public for the usage of the machines is not subject to the tax.
For your convenience I have enclosed a registration application for completion. Please return the form to the department's Registration Unit, P.O. Box 6-L, Richmond, Virginia 23282-0001.
I hope the foregoing has responded to your inquiry. If you have additional questions, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner