Tax Type
Retail Sales and Use Tax
Description
Leases and rentals; Service charges in connection with lease
Topic
Taxability of Persons and Transactions
Date Issued
07-28-1995
July 28, 1995
Re: §58.1-1821 Appeal: Retail Sales and Use Tax
Dear****************
This will reply to your letter of March 10, 1995 in which you seek correction of a sales and use tax assessment to your client, **********("the "Taxpayer"), for the period January 1992 through December 1994.
FACTS
The Taxpayer, a lessor of scaffolding and ladders to contractors and construction companies, contests a recent sales tax assessment on separately stated finance, assembly and disassembly charges made in connection with its leases. In addition to charging a rental fee for the scaffolding, the Taxpayer may charge fees for the installation and disassembly of the scaffolding if the customer so desires. Finance charges are added to customer balances not paid in full. You suggest that the separately stated finance, assembly and disassembly charges were erroneously held taxable by the auditor.
DETERMINATION
The department's policy with respect to service charges in connection with rentals or leases is very clear and set forth not only in the department's regulation, Virginia Regulation IVR) 630-10-57, copy enclosed, but also in numerous public documents. VR 630-10-57 provides that "[a]ny person engaged in the business of leasing or renting tangible personal property to others is required to register as a dealer and collect and pay the tax on gross proceeds." (Emphasis added.) "Gross proceeds" is defined in Code of Virginia §58.1 -602 and the regulation as "the charges made or voluntary contributions received for the lease or rental of tangible personal property or for furnishing services, computed with the same deductions, where applicable, as for sales price...." The regulation further clarifies that the term includes "any finance or interest charges, insurance charges, charges for property tax on the property being leased, and other similar charges."
You suggest that the Taxpayer's assembly, disassembly, and finance charges are exempt from the tax under VR 630-10-95 which excludes from the amount subject to tax as part of the sales price (1) separately stated charges for repair, installation, application or remodeling labor or services and (2) separately stated finance, carrying or service charges or interest directly attributable to credit extended on sales under conditional sales contracts or conditional deferred payment contracts (such as installment sales). However, VR 630-10-95, which clarifies the definition of "sales price" set forth in Code of Virginia §58.1-602, clearly states that "'sales price' means the total amount for which tangible personal property or taxable services are sold and includes any services in connection with such sale." (Emphasis added.) Thus, any services provided by the Taxpayer in connection with the lease thereof are taxable regardless of whether they are separately stated on the invoice for the lease or on a completely separate invoice.
For your information, I am enclosing several public documents which further explain the department's policy with respect to lease charges - PDs 94-90 (3/25/94), 91-19 (2/21/91), 87-241 (10/23/87). PD 91-19 specifically addresses the issues at hand .
Accordingly, the assessment as issued is correct. A revised Notice of Assessment with accrued interest will be mailed to the Taxpayer shortly.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/9471H
Rulings of the Tax Commissioner