Tax Type
Retail Sales and Use Tax
Description
Motor vehicles; Crane sale and crane purchase
Topic
Taxability of Persons and Transactions
Date Issued
10-14-1997
October 14, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear*************
This is in reply to your letter in which you seek correction of sales and use tax assessed to********("Taxpayer") for the period January 1994 through December 1996. I apologize for the delay in responding to your letter.
FACTS
The taxpayer rents cranes with and without operators. The lease term for a particular crane varies and depends upon the time needed to complete a particular job. Most rentals are short-term in nature.
The taxpayer was audited and assessed tax on sales, leases, and purchases. You protest the assessment of tax on three transactions. Subsequent to your protest and based on evidence submitted, the department agreed to remove from the audit an assessment of tax on insurance proceeds resulting from damage to a crane. This leaves the following contested issues:
1. The taxpayer sold a crane without collecting sales tax. The purchaser titled the crane with the Department of Motor Vehicles and paid the motor vehicle sales and use tax. The taxpayer was assessed with retail sales tax for failing to collect tax on the sale. The taxpayer believes that payment of the motor vehicle sales and use tax relieves the taxpayer from retail sales and use tax liability.
2. The taxpayer purchased Crane #153, PPM P&H Model CNT500, without paying sales tax. You state that this particular crane has been rented with and without operators. The taxpayer was assessed with use tax. The taxpayer believes it should be allowed to title this crane and pay the motor vehicle sales and use tax in lieu of paying the retail sales and use tax.
DETERMINATION
I will address these two assessments below.
1. Sale of crane
Motor vehicles are exempt from the retail sales and use tax under Code of Virginia § 58.1-609.1(2) (copy enclosed). A motor vehicle means a "motor vehicle" as defined in Code of Virginia § 58.1-2401, subject to the motor vehicle sales and use tax, and upon the sale of which all applicable sales and use taxes have been paid. Code of Virginia § 58.1-602 (copy enclosed). Vehicles not subject to the motor vehicle sales and use tax are subject to the retail sales and use tax when sold, leased, or rented. Title 23 of the Virginia Administrative Code (VAC) 10-210-990 (copy enclosed).
Code of Virginia § 58.1-2401 defines a motor vehicle as "every vehicle . . . which is self-propelled or designed for self-propulsion and every vehicle drawn by or designed to be drawn by a motor vehicle . . . but excepting devices . . . used in this Commonwealth but not required to be licensed by the Commonwealth" (emphasis added).
The crane at issue was a self-propelled vehicle. The purchaser titled the crane and paid the motor vehicle sales and use tax. License plates were not issued at the time of titling.
The gross weight of the crane is 62,000 pounds and it has 2 axles. See 1985 Certificate of Title for a Vehicle (copy enclosed). The gross weight exceeds the maximum allowable for vehicles with 2 axles. Code of Virginia § 46.2-1126 (copy enclosed).
The Department of Motor Vehicles cannot license vehicles exceeding maximum weight limitations set by statute. Before such vehicles can be moved on Virginia public highways, a special permit must be obtained from the Department of Transportation. You stated that the taxpayer procured a blanket hauling permit which allows it to transport its cranes on the highways.
The crane in question cannot be licensed by the Department of Motor Vehicles. Titling of the crane and payment of the motor vehicle sales and use tax by the purchaser was not required nor was it sufficient to move the crane on the public highways. Because it cannot be licensed for use on the highways by the Department of Motor Vehicles, the crane is not subject to the motor vehicle sales and use tax. Accordingly, the sale of the crane was subject to the retail sales and use tax and is appropriately taxed in the assessment.
At this point, the purchaser of the crane may make a claim for a refund of motor vehicle sales and use tax paid. The claim must be made to the Commissioner of the Department of Motor Vehicles within three years from the date of the payment of the tax. Code of Virginia § 58.1-2423 (copy enclosed).
2. Purchase of crane and subsequent lease with and without operators
The taxpayer purchased Crane #153, PPM P&H Model CNT500. No sales tax was paid on the purchase. This particular crane has been rented with and without operators.
A use tax is levied upon the use or consumption of tangible personal property in Virginia. Code of Virginia § 58.1-604 (copy enclosed). Under Public Document 91-312 (copy enclosed), a taxpayer is required to remit use tax to the department when a crane is withdrawn from its rental inventory for its own use or when leased on an FMO basis (fully maintained and operated).
The taxpayer has leased the crane at issue with operators, i.e. on a fully maintained and operated basis. The taxpayer has used this crane within the meaning of § 58.1 -604 and is liable for use tax.
The taxpayer argues it should be allowed to title this crane and to pay the motor vehicle sales and use tax in lieu of paying the retail sales and use tax.
You state that the crane is 41' 9" in length and 9' 10" in width. These dimensions exceed the maximum allowable for vehicles under Code of Virginia §§ 46.2-1112 and 46.2-1105, respectively (copies enclosed). Thus, the crane cannot be licensed for use on the public highways by the Department of Motor Vehicles.
For the same reasons stated in Section 1 above, the crane is not subject to the motor vehicle sales and use tax. Vehicles not subject to the motor vehicle sales and use tax are subject to the retail sales and use tax when sold, leased, or rented. I find no basis for removing use tax assessed on the purchase of this crane.
The audit will be revised to remove sales tax and interest assessed on proceeds received by the taxpayer for damage to one of its cranes. In all other respects, the assessment is correct. The taxpayer will shortly receive an updated bill with interest accrued to date. The bill should be paid within sixty days to avoid the accrual of additional interest. If you have any questions, please call *******in the Office of Tax Policy at******** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12415C
Rulings of the Tax Commissioner