Tax Type
Retail Sales and Use Tax
Description
Motel restaurant lease charge that includes tangible personal property
Topic
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
08-04-2000
August 4, 2000
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This will reply to your letter in which you seek the correction of sales and use tax assessments issued to ***** (Taxpayer 1) and ***** (Taxpayer 2) for the periods of September 1995 through May 1998 and November 1997 through May 1998, respectively. I apologize for the delay in responding to your appeal.
FACTS
Taxpayer 1 and Taxpayer 2 own and operate motels. Taxpayer 1 was assessed sales tax on charges billed to a lessee for the lease of a restaurant owned by Taxpayer 1. The assessment was made on the portion of the lease consisting of furniture and fixtures. Taxpayer 1 asks for waiver of the tax on the lease charges. Taxpayer 2 was assessed use tax on furniture and fixtures included in the purchase price of a motel. Taxpayer 2 maintains that the furniture and fixtures had no value and were not in usable condition after the purchase. Taxpayer 2 requests an exemption from the tax on the purchase of the unusable furniture and fixtures.
DETERMINATION
Taxpayer 1
Code of Virginia § 58.1-603 provides that the sales tax applies to the lease or rental of tangible personal property in Virginia. The department has previously determined that when a real property lease includes tangible personal property, the sales tax applies to the value of the tangible personal property that is included in the total lease charge. The enclosed copy of Public Document 95-223 (8/29/95) explains the department's longstanding policy and discusses the allocation of the sales tax to charges for a lease that includes tangible personal property and real property.
Based on the above, the tax was properly assessed on the value of the tangible personal property included in the lease of the restaurant. Taxpayer 1 is required to bill and collect the sales tax from the lessee on the tangible personal property component of the monthly lease charge for the restaurant.
Taxpayer 2
Taxpayer 2 purchased a motel that included land, a building, and tangible personal property. Sales tax was assessed on the value of the tangible personal property included in the purchase price of the motel. Taxpayer 2 maintains that the tangible personal property had no value and was either given away or disposed.
The assessment of tax was based on the value of the tangible personal property included with the purchase of the motel. The value of this property was obtained through personal property tax records. In this case, there is no legal authority to grant Taxpayer 2 a special exemption. However, I will agree to adjust the assessment if Taxpayer 2 can provide documentation showing that the value of the tangible personal property included in the motel's purchase price is lower than the values used in the audit. Such documentation might include a copy of the sales agreement or contract that lists the values of the tangible personal property in question.
I will allow Taxpayer 2 sixty days from the date of this letter to provide this documentation to the department. Taxpayer 2 may contact the department's ***** District Office at ***** to set up a mutually agreeable time to review any documentation available. I note that the assessment for Taxpayer 1 has been paid in full. The department's records indicate that a balance of $***** remains on the assessment for Taxpayer 2. I encourage Taxpayer 2 to set up an installment payment plan with the department to begin payment of this balance. Please contact ***** in the department's Office of Tax Policy at ***** if there are questions concerning this determination.
Sincerely,
Danny M. Payne
Tax Commissioner
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This will reply to your letter in which you seek the correction of sales and use tax assessments issued to ***** (Taxpayer 1) and ***** (Taxpayer 2) for the periods of September 1995 through May 1998 and November 1997 through May 1998, respectively. I apologize for the delay in responding to your appeal.
FACTS
Taxpayer 1 and Taxpayer 2 own and operate motels. Taxpayer 1 was assessed sales tax on charges billed to a lessee for the lease of a restaurant owned by Taxpayer 1. The assessment was made on the portion of the lease consisting of furniture and fixtures. Taxpayer 1 asks for waiver of the tax on the lease charges. Taxpayer 2 was assessed use tax on furniture and fixtures included in the purchase price of a motel. Taxpayer 2 maintains that the furniture and fixtures had no value and were not in usable condition after the purchase. Taxpayer 2 requests an exemption from the tax on the purchase of the unusable furniture and fixtures.
DETERMINATION
Taxpayer 1
Code of Virginia § 58.1-603 provides that the sales tax applies to the lease or rental of tangible personal property in Virginia. The department has previously determined that when a real property lease includes tangible personal property, the sales tax applies to the value of the tangible personal property that is included in the total lease charge. The enclosed copy of Public Document 95-223 (8/29/95) explains the department's longstanding policy and discusses the allocation of the sales tax to charges for a lease that includes tangible personal property and real property.
Based on the above, the tax was properly assessed on the value of the tangible personal property included in the lease of the restaurant. Taxpayer 1 is required to bill and collect the sales tax from the lessee on the tangible personal property component of the monthly lease charge for the restaurant.
Taxpayer 2
Taxpayer 2 purchased a motel that included land, a building, and tangible personal property. Sales tax was assessed on the value of the tangible personal property included in the purchase price of the motel. Taxpayer 2 maintains that the tangible personal property had no value and was either given away or disposed.
The assessment of tax was based on the value of the tangible personal property included with the purchase of the motel. The value of this property was obtained through personal property tax records. In this case, there is no legal authority to grant Taxpayer 2 a special exemption. However, I will agree to adjust the assessment if Taxpayer 2 can provide documentation showing that the value of the tangible personal property included in the motel's purchase price is lower than the values used in the audit. Such documentation might include a copy of the sales agreement or contract that lists the values of the tangible personal property in question.
I will allow Taxpayer 2 sixty days from the date of this letter to provide this documentation to the department. Taxpayer 2 may contact the department's ***** District Office at ***** to set up a mutually agreeable time to review any documentation available. I note that the assessment for Taxpayer 1 has been paid in full. The department's records indicate that a balance of $***** remains on the assessment for Taxpayer 2. I encourage Taxpayer 2 to set up an installment payment plan with the department to begin payment of this balance. Please contact ***** in the department's Office of Tax Policy at ***** if there are questions concerning this determination.
Sincerely,
Danny M. Payne
Tax Commissioner
Related Documents
Rulings of the Tax Commissioner