Tax Type
Retail Sales and Use Tax
Description
Lease of medical equipment
Topic
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
07-29-1993
July 29, 1993
Re: §58.1-1821 Application: Retail Sales & Use Tax
Dear**************
This will reply to your letter of April 26, 1993 in which you seek correction of a sales and use tax assessment for********** (the Taxpayer).
FACTS
The Taxpayer, a for profit corporation, operates as an industrial medical clinic jointly owned by you and a second person. An audit for the period September 1986 through August 1992 produced an assessment primarily for untaxed lease payments for the use of medical equipment leased by the Taxpayer from a professional corporation which you solely own.
You contend that there has never been a lease of tangible personal property, rather that the equipment lease agreement is merely a vehicle used to facilitate the repayment of loans which you undersigned on behalf of the Taxpayer and the professional corporation when both facilities were purchased.
DETERMINATION
The term "sale" is defined in Va. Code §58.1-602 as "any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property." That same Code section defines "lease" to mean "the leasing or renting of tangible personal property and the possession or use thereof by the lessee or renter for a consideration, without transfer of the title to the property."
Thus, virtually any transaction involving consideration, including transfers or rentals between businesses which share common ownership, is subject to the sales and use tax. Also, since the professional corporation, acting in its capacity of lessor, did not collect the sales tax in this instance, the Taxpayer was held liable for the use tax as authorized in Virginia Regulation (VR) 630-10-109.
Further, a review of the contract in the instant case clearly shows that it is a lease agreement. For example, (i) the Taxpayer and the professional corporation are referred to as lessee and lessor, respectively; (ii) it is stipulated that the lessor owns the specified equipment listed in the agreement and wishes to lease that equipment to the lessee; (iii) it is mandated that the equipment will remain the personal property of the lessor; and (iv) a schedule of monthly payments is specified for the entire lease period.
Therefore, while it may be that the intent of the parties is to facilitate accounting procedures as you contend, the department must rely on the underlying document which governs the transaction. As that document is an agreement for the lease of tangible personal property for a consideration, I can find no basis for correction of the assessment.
Accordingly, the assessment is now due and payable. A payment copy of the assessment, with interest accrued to date, will be mailed to the Taxpayer shortly. That assessment must be paid within 30 days to avoid accrual of additional interest and other collection action.
Sincerely,
W. H. Forst
Tax Commissioner
OTP/6950I
Rulings of the Tax Commissioner