Tax Type
Retail Sales and Use Tax
Description
Motor vehicles; Replacement parts installed in leased vehicles
Topic
Taxability of Persons and Transactions
Date Issued
01-07-1994
January 7, 1994
Dear ****
This is in reply to your letter in which you request a ruling on behalf of * * * (the "Taxpayer') regarding the applicability of the Virginia retail sales and use tax on repair and replacement parts installed in vehicles leased on a long-term basis.
FACTS
The Taxpayer is a full service tractor/trailer/truck leasing company which leases, rents, and services motor vehicles. When a vehicle is purchased for use in a long-term lease, the Taxpayer pays the motor vehicle sales and use tax to the Department of Motor Vehicles based on the purchase price of the vehicle. During the term of the lease, the Taxpayer purchases repair and replacement parts for installation in the vehicles. The Taxpayer requests a ruling on whether the parts purchased and used to repair vehicles curing the long-term lease are subject to retail sales and use tax.
RULING
Virginia Regulation (VR) 630-10-67(C) provides that:
The retail sales and use tax does not apply to repair and replacement parts and accessories and oil and grease installed on a motor vehicle before or at the time of sale, lease or rental that are included in the sales price for measuring the motor vehicle sales and use tax or the retail sales and use tax.
In that the long-term lease payments charged to customers are not subject to the motor vehicle sales and use tax (as provided in Va. Code § 58.1-2402) the resale exemption provided in VR 630-10-67(C) is not applicable. As such, the Taxpayer is considered the user and consumer of repair and replacement parts installed in a long-term lease vehicle and is required to pay the tax to the supplier. If the supplier is not registered to collect the tax or if he does not collect the tax, the Taxpayer must report and pay the use tax on a Consumer Use Tax Return, Form ST-7.
If you have any other questions regarding this matter, please contact the department.
Sincerely
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner