Tax Type
Retail Sales and Use Tax
Description
Leases and rentals; Charge for property taxes
Topic
Taxability of Persons and Transactions
Date Issued
03-25-1994
March 25, 1994
Re: Request for Ruling: Retail Sales and Use Tax
Dear*********
Your letter of November 15, 1993 concerning the application of the tax to leases, and addressed to the Division of Legislative Services, has been referred to the Department of Taxation.
FACTS
**********("the Taxpayer") is a lessor of tangible personal property. The Taxpayer makes a separate billing to its lessees so that it may be reimbursed for personal property taxes. The Taxpayer currently charges sales tax on these property tax billings and inquires if this is correct procedure.
DETERMINATION
The application of the sales tax to leases and rentals is governed by Virginia Regulation (VR) 630-10-57 and was also addressed in the enclosed P. D. 91-241 (10/8/91). The regulation provides that a lessor of tangible personal property is required to collect and remit the tax on gross proceeds and defines gross proceeds to include "charges for property tax on the property being leased, and other similar charges."
Therefore, to the extent that personal property tax payments are received as part of the gross proceeds from the lease of tangible personal property, the Taxpayer's method of billing is correct, even when the personal property tax is separately billed.
Sincerely,
Danny M. Payne
Acting Tax Commissioner
OTP/7587I
Rulings of the Tax Commissioner