Tax Type
Retail Sales and Use Tax
Description
Leases and rentals; Damage waiver charges
Topic
Taxability of Persons and Transactions
Date Issued
12-09-1996
December 9, 1996
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****************
This is in response to your letter of September 19,1996 in which you seek correction of a sales and use tax assessment issued to***** (the "Taxpayer") for the period April 1993 through December 1995.
FACTS
The Taxpayer operates a rental center and makes rentals of property for all types of homeowner and business needs. The only issue under protest is the assessment of the tax to damage waiver charges made in conjunction with the rental of equipment.
DETERMINATION
The application of the tax to charges made in connection with the lease or rental of property has been addressed in a number of prior determinations issued by the Tax Commissioner. For example, see the enclosed Public Documents 87-241 (10/23/87) and 94-119 (4/19194) .
Code of Virginia §58.1-603 imposes the tax on the "gross proceeds derived from the lease or rental of tangible personal property...." The term "gross proceeds" is defined in §58.1-602 to be "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 as defined in this section...."
There is no provision in the statutory definition of "sales price" which would exclude damage waiver charges. Further, Virginia Regulation 630-10-57 clearly subjects to the tax any charges in connection with the lease of property. Accordingly, the damage waiver charges charged by the Taxpayer and paid by customers are subject to the tax.
Based on the above, the assessment is found to be correct. The Taxpayer will be allowed, however, to pay the assessment through an installment payment plan as requested. A representative from the department will contact the Taxpayer as soon as practicable to arrange such a payment plan.
In addition to the documents noted above, I have also enclosed Virginia Tax Bulletin 95-7. This Bulletin addresses a change in tax policy, effective January 1, 1996, regarding separately stated transportation charges made in connection with the lease or rental of property.
Please contact ******** in my Office of Tax Policy at if you have any questions regarding this letter.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/116551
Rulings of the Tax Commissioner