Tax Type
Retail Sales and Use Tax
Description
Leases; Communication center
Topic
Taxability of Persons and Transactions
Date Issued
12-28-1992
December 28, 1992
Re: §58.1-1821 Application: Retail Sales & Use Tax
Dear***************
This will reply to your letter of March 20, 1992 seeking correction of a sales and use tax assessment to your client,**********(the "Taxpayer"), for the period January 1988 through May 1991.
FACTS
The Taxpayer provides technical support and operates communication centers for governmental agencies. It was audited and found to have failed to pay the tax on several purchases. The Taxpayer has submitted additional documentation to support its claim that the following items should be removed from the assessment:
- leases through*************("Lessor l");
- double counted items;
- lease payments to *************("Lessor 2") which included the sales tax;
- leases for which the tax was paid "up front" on the purchase; and
- computers, computer parts and related items purchased for resale to the federal government.
DETERMINATION
I will address each of the above issues individually below:
Leases through Lessor 1: The Taxpayer maintains that some of the lease transactions included in the assessment were for items located outside of Virginia and, that for those items located in Virginia, the tax had been paid to the Lessor in the monthly payments. A review of the documentation provided indicates that the lease payment included the tax which was collected and remitted to the department by the Lessor. Based on this information, I will agree to remove such items from the assessment.
Double counted items: The Taxpayer maintains that some items were counted twice by the auditor. Since a review of the audit papers reveals that this was the case, the assessment will be revised to remove the double counted items.
Lease payments to Lessor 2 which included sales tax: The Taxpayer has provided documentation indicating that the sales tax was included in the monthly payments to Lessor 2. Accordingly, I will agree to remove such lease payments from the assessment.
Leases for which the tax was paid "up front": The Taxpayer has indicated that the tax was paid "up front" on the purchases of certain equipment from an unrelated third party. However, a review of the documentation presented reveals that the tax was paid by the lessors of the equipment, not the Taxpayer. Thus, notwithstanding the fact that the lessors had paid the tax up front, the subsequent leases of the equipment to the Taxpayer were taxable
Some of the documentation presented, however, indicates, that the tax had been paid by the Taxpayer as part of a monthly lease payment to one of the lessors (***********lease of computer equipment). Thus, I will agree to remove from the assessment the above mentioned lease and will consider any other documentation indicating that the sales tax had been paid as part of the monthly lease charge if provided by the Taxpayer within 45 days.
Computers, computer parts and related items: The Taxpayer maintains that certain computers, computer parts and other related items were purchased for resale to the federal government and were not incidental to the services required. The auditor determined that the computers, parts, etc., were used in providing services to the federal government and thus were taxable. While an affidavit from a representative of the federal government was supplied by the Taxpayer to support its contention, the information contained therein was vague. Accordingly, I am referring this matter back to the**********Audit Section for the purpose of obtaining the security clearances necessary to review the contract. Someone from that office will be contacting you shortly.
Accordingly, the requested information should be sent to the department's*********Audit Section, P. O. Box 1880, Richmond Virginia 23282-1880. Upon review of the contract by the*********Audit Section, all necessary revisions to the audit will be completed.
Sincerely.
W. H. Forst
Tax Commissioner
OTP/6079H
Rulings of the Tax Commissioner