Tax Type
Retail Sales and Use Tax
Description
Audit assessing tax, interest and penalty
Topic
Taxability of Persons and Transactions
Date Issued
10-29-1997
October 29, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear****************
This is in response to your letter of September 19, 1997 seeking correction of a sales and use tax assessment issued to *********(the "Taxpayer"), for the period May 1991 to April 1994.
FACTS
The Taxpayer is a materials handling equipment company located in the Commonwealth. Part of the Taxpayer's business consists of leasing forklifts to other businesses. A fee for delivery and pickup is billed and collected as a separate charge with respect to each forklift leased.
The Taxpayer disputes the portion of the audit assessing tax, interest and penalty on the Taxpayer's freight charges for delivery and pickup of the leased forklifts. I understand that the original assessment has been adjusted and the only remaining issue is the assessment for pickup charges.
DETERMINATION
Code of Virginia § 58.1-603 imposes the sales tax on the "gross proceeds derived from the lease or rental of tangible personal property...." "Gross proceeds" is defined in Code of Virginia § 58.1-602 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...." Title 23 of the Virginia Administrative Code (VAC) 10-210-4000 defines "sales price" as including "any services in connection with such sale." The regulation provides an exclusion for separately stated charges for delivery. However, there is no provision in the regulation to exclude pickup charges from the sales price calculation.
In this case, the Taxpayer billed for and collected a separately itemized fee for pickup and delivery services rendered in connection with its forklift leases. Under the code and regulation provisions discussed above, charges for services in connection with the rental of tangible personal property are generally taxable unless a specific exclusion applies. The only applicable exclusion under the facts presented in this case is that provided for delivery charges. The remaining portion of the fee for pickup has been properly determined taxable under the general rule stated above.
Although the change does not affect this assessment, the Department has modified its policy with regard to pickup charges effective January 1, 1996. A separately stated pickup fee charged after the effective date will be exempt from the tax. I have enclosed a copy of the Tax Bulletin explaining this change.
I note that a lien has been filed and is currently outstanding against any of the Taxpayer's assets held by Crestar Bank. A duplicate bill for the assessment covered by the lien will be issued to you immediately. No further action to enforce the lien will be taken provided the assessment is paid within 30 days.
If you have any questions regarding this letter, please contact ***in Office of Tax Policy at ***** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/13039D
Rulings of the Tax Commissioner