Tax Type
Retail Sales and Use Tax
Description
Real property lease ,tangible personal property; Nursing home facilities
Topic
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
08-10-1992
August 10, 1992
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This will reply to your letter dated May 8, 1991 in which you seek correction of a sales and use tax assessment for your client, * * * (the Taxpayer), for the period November, 1987 through December, 1989.
FACTS
The Taxpayer provides nursing home facilities within the Commonwealth. The Taxpayer leased a nursing home facility prior to constructing its own facility in the same area. The leasing agreement provides for both real property and tangible personal property. The Taxpayer contests the application of the tax to the tangible personal property based on extenuating circumstances which gave rise to the lease agreement.
DETERMINATION
The Virginia Retail Sales and Use Tax Act as provided in Va. Code § 58.1-602 is clear with regard to the imposition of tax to sales, leases and rentals of tangible personal property. While the lease of real property and fixtures attached thereto is not subject to the sales tax, the lease of tangible personal property is taxable. The leasing agreement in this case provides for the transfer of furnishings and personal property. Therefore, the auditor was correct in assessing the tax to the portion of the agreement which applies to the tangible personal property.
The Taxpayer argues that the transaction qualifies as an exempt service under Virginia Regulation (VR) 630-10-97.1, in that the tangible personal property involved is not critical to the transaction; however I cannot agree. The tangible personal property transferred to the Taxpayer is integral to the operation of the facility, thus the object of the transaction is to obtain both the real and tangible personal property for that purpose.
Finally, the instant case does not meet any of the tests set forth in VR 630-10-75 which explains the occasional sale exemption and therefore the exemption does not apply.
While I understand the reasons for engaging in the lease agreement, absent the statutory authority, I cannot grant your request for exemption from the sales and use tax. The department's assessment is now due and payable.
If you have additional questions concerning this matter, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner