Tax Type
Retail Sales and Use Tax
Description
Rail car rebates
Topic
Basis of Tax
Date Issued
11-05-1992
November 5, 1992
Re: §58.1-1821 Application: Retail Sales & Use Tax
Dear***************
This will reply to your letter of May 27, 1992 seeking correction of a sales and use tax assessment to your client, *************(the "Taxpayer"), for the period August 1988 through July 1991.
FACTS
The Taxpayer, a chemical manufacturer, contests the inclusion in the assessment of railcar rebates which it maintains effectively reduce the gross proceeds upon which the tax is calculated. You contend that for the use of the railcars, the Taxpayer is paying the amount in the lease agreement less any credits which the lessor permits and thus, the gross proceeds of the lease is the amount the Taxpayer actually pays, not the amount before the rebates.
DETERMINATION
The tax treatment of railcar rebates was addressed by the department in P.D. 90-121 (8/1/90), enclosed. As the letter explains, in the railroad industry the mileage charges (railcar rebates) accrue to the Taxpayer rather than the owners of the cars. Thus, it is the Taxpayer's own funds that are credited to its rental account by the car owners. The mileage credits and other payments by the Taxpayer both represent taxable lease payments and the combination of the credits and other payments represent the car owners' gross proceeds from the leases.
Based on the foregoing, the tax was properly assessed and the assessment is due and payable. The Taxpayer will shortly receive a bill with interest accrued to date which should be paid within 30 days to avoid the accrual of additional interest.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6433H
Rulings of the Tax Commissioner