Tax Type
Retail Sales and Use Tax
Description
Leases and Rentals
Topic
Taxability of Persons and Transactions
Date Issued
11-17-1999
November 17, 1999
Request for Ruling: Retail Sales and Use Tax
Dear
This is in reply to your letter in which you seek a ruling on the application of the retail sales and use tax to the lease of color copier machines for producing copies for resale. I apologize for the delay in responding to your letter.
FACTS
***** (the "Taxpayer') operates retail drug stores. The Taxpayer may enter into an agreement for the lease of color copier machines. Title to the copier machines will remain with the lessor. The copier machines would be placed in the Taxpayer's retail store locations for the purpose of providing copy services to its customers. The copier machines can produce document color conversions, photo retouching, reverse imaging, and photocopying of documents.
The Taxpayer requests a ruling on the application of the retail sales and use tax to the lease of the color copier machines used to produce photocopies and subsequent resale of such photocopies to its customers. The Taxpayer also seeks a ruling on the taxation of supplies purchased for use in producing the photocopies. Finally, the Taxpayer asks if the lease of the color copier machines qualifies for the industrial manufacturing exemption.
RULING
Tax Treatment of Leases
Code of Virginia Sec. 58.1-603 imposes the sales tax on every person who sells or leases or rents tangible personal property in the Commonwealth. Code of Virginia Sec. 58.1-602 defines sale to mean "any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property....' The sale or lease of color copier machines constitutes a taxable lease or rental of tangible personal property and is taxable.
The tax imposed by Code of Virginia Secs.58.1-603 and 58.1-604 on the lease of tangible personal property is to be collected by the "dealer' and remitted to the department. The term "dealer' is defined in Code of Virginia Sec. 58.1-612 (B) to include every person who leases or rents tangible personal property for a consideration. Accordingly, the lessor is required to collect and remit the sales tax on the gross proceeds derived from the lease of the color copier machines. If the lessor does not collect the sales tax, the Taxpayer (as lessee) is required to remit use tax on the cost price (i.e., the lease payments) of the property used in Virginia. See Code of Virginia Secs.58.1-612(B)(7) and 58.1-604.
Photocopying
Title 23 of the Virginia Administrative Code (VAC) 10-210-3010(K) provides that the sale of photocopies represents the taxable sale of tangible personal property. Purchases of chemicals, paper and other materials by persons operating photocopying or photostating machines which become a component part of the finished print for sale may be purchased under a resale certificate of exemption.
This same regulation provides that persons operating photocopy or photostating machines primarily for the reproduction of copies furnished by customers are not industrial manufacturers and are not entitled to exemption from the tax on machinery used in their businesses. Enclosed is Public Document (P. D.) 97-377 (9/18/97) which addresses the taxation of color copying machines. In addition, this document explains the application of the tax to maintenance agreements.
Based on the information provided, the Taxpayer is making retail sales of photocopies and is required to collect and pay the Virginia sales and use tax based on the selling price of the photocopies.
Summary
I have enclosed copies of the cited statutes and regulation. Also enclosed are copies of P.D. 89-241 (9/11/89) and P.D. 85-226 (12/19/85), which further explain the distinction between commercial photocopying businesses and those businesses that reproduce documents for resale to customers.
I hope the foregoing has responded to your inquiry. If you have additional questions, you may contact ***** in the department's Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/22888T
Request for Ruling: Retail Sales and Use Tax
Dear
This is in reply to your letter in which you seek a ruling on the application of the retail sales and use tax to the lease of color copier machines for producing copies for resale. I apologize for the delay in responding to your letter.
FACTS
***** (the "Taxpayer') operates retail drug stores. The Taxpayer may enter into an agreement for the lease of color copier machines. Title to the copier machines will remain with the lessor. The copier machines would be placed in the Taxpayer's retail store locations for the purpose of providing copy services to its customers. The copier machines can produce document color conversions, photo retouching, reverse imaging, and photocopying of documents.
The Taxpayer requests a ruling on the application of the retail sales and use tax to the lease of the color copier machines used to produce photocopies and subsequent resale of such photocopies to its customers. The Taxpayer also seeks a ruling on the taxation of supplies purchased for use in producing the photocopies. Finally, the Taxpayer asks if the lease of the color copier machines qualifies for the industrial manufacturing exemption.
RULING
Tax Treatment of Leases
Code of Virginia Sec. 58.1-603 imposes the sales tax on every person who sells or leases or rents tangible personal property in the Commonwealth. Code of Virginia Sec. 58.1-602 defines sale to mean "any transfer of title or possession, or both, exchange, barter, lease or rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property....' The sale or lease of color copier machines constitutes a taxable lease or rental of tangible personal property and is taxable.
The tax imposed by Code of Virginia Secs.58.1-603 and 58.1-604 on the lease of tangible personal property is to be collected by the "dealer' and remitted to the department. The term "dealer' is defined in Code of Virginia Sec. 58.1-612 (B) to include every person who leases or rents tangible personal property for a consideration. Accordingly, the lessor is required to collect and remit the sales tax on the gross proceeds derived from the lease of the color copier machines. If the lessor does not collect the sales tax, the Taxpayer (as lessee) is required to remit use tax on the cost price (i.e., the lease payments) of the property used in Virginia. See Code of Virginia Secs.58.1-612(B)(7) and 58.1-604.
Photocopying
Title 23 of the Virginia Administrative Code (VAC) 10-210-3010(K) provides that the sale of photocopies represents the taxable sale of tangible personal property. Purchases of chemicals, paper and other materials by persons operating photocopying or photostating machines which become a component part of the finished print for sale may be purchased under a resale certificate of exemption.
This same regulation provides that persons operating photocopy or photostating machines primarily for the reproduction of copies furnished by customers are not industrial manufacturers and are not entitled to exemption from the tax on machinery used in their businesses. Enclosed is Public Document (P. D.) 97-377 (9/18/97) which addresses the taxation of color copying machines. In addition, this document explains the application of the tax to maintenance agreements.
Based on the information provided, the Taxpayer is making retail sales of photocopies and is required to collect and pay the Virginia sales and use tax based on the selling price of the photocopies.
Summary
I have enclosed copies of the cited statutes and regulation. Also enclosed are copies of P.D. 89-241 (9/11/89) and P.D. 85-226 (12/19/85), which further explain the distinction between commercial photocopying businesses and those businesses that reproduce documents for resale to customers.
I hope the foregoing has responded to your inquiry. If you have additional questions, you may contact ***** in the department's Office of Tax Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/22888T
Rulings of the Tax Commissioner