March 27, 2024
Re: § 58.1-1821 Application: Motor Vehicle Rental Tax
Dear *****:
This will respond to your letter on behalf of ***** (the “ Taxpayer” ), in which you seek correction of the motor vehicle rental tax assessment issued for the period July 2012 through October 2017. I apologize for the delay in responding to your letter.
FACTS
The Taxpayer leases all of its mobile and construction equipment under an exclusive long-term lease with ***** (the “ Parent” ). The lease term began on January 1, 2002, and continues on a year-to-year basis without cessation. Lease payments are paid in monthly installments depending upon usage. Under audit, the Department assessed the Taxpayer motor vehicle rental tax based on invoices regarding the usage of mobile and construction equipment by the Parent. The Taxpayer seeks a correction, contending that the assessment should be abated because the lease for the mobile and construction equipment is for a period of more than 12 months and therefore does not qualify as a “ rental” within the terms of the Virginia Motor Vehicle Rental Tax Act (Virginia Code § 58.1-1734 et seq.).
DETERMINATION
Virginia Code § 58.1-1735 defines, motor vehicle “rental” as “ the transfer of the possession or use of a motor vehicle, whether or not the motor vehicle is required to be licensed by the Commonwealth, by a person for a consideration, without the transfer of the ownership of such motor vehicle, for a period of less than 12 months.”
The invoices upon which the Department’s assessment rests do not constitute micro-rental agreements. The Taxpayer and the Parent executed a long-term lease of its mobile and construction equipment, for which the monthly payment was to be determined by the Parent’s usage. That lease is indefinite in duration and, at the time of the audit, had been in place for more than 10 years.
Based on the facts presented and the above analysis, the Taxpayer’s lease does not qualify as a “rental” as defined in Virginia Code § 58.1-1735 and, therefore, is not subject to the Virginia motor vehicle rental tax. Rather it is, a long-term lease of a motor vehicle that remains subject to the provisions of the Virginia motor vehicle sales and use tax, which is administered by the Department of Motor Vehicles. Accordingly, the assessment is abated.
The Code of Virginia section cited is available on-line at www.tax.virginia.gov in the Laws, Rules, and Decisions section of the Department’s web site. If you have any questions about this response, you may contact ***** in the Department’s Office of tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1647.F