Tax Type
Retail Sales and Use Tax
Description
Sales for resale
Topic
Exemptions
Date Issued
08-29-1985
August 29, 1985
Dear ****
This will reply to your letter of July 30, 1985, in which you submit a request for a ruling on the application of the sales and use tax to a sale and leaseback situation.
In the situation presented in your letter, a Virginia design company purchases fixtures and equipment for resale and imports them into Virginia for storage at a bonded warehouse. The design company will then sell such items to purchasers who may or may not be located in Virginia, with delivery to the purchasers being made by the design company's own vehicles. The purchasers in turn resell the fixtures and equipment to a leasing company which leases the items back to the purchasers.
Based upon the factual situation presented in your letter, the purchase of fixtures and equipment by the Virginia design company is an exempt sale for resale, provided that no use is made of the items prior to their resale. The sale from the purchaser to the leasing company also is an exempt for resale, again provided that the purchaser makes no use of the items prior to their resale. As the sales and use tax is applicable to the ultimate user or consumer of tangible personal property, you are correct in that the tax would be applicable in this situation only to the leaseback from the leasing company to the purchaser, provided of course that the purchaser makes use of the leased back property in Virginia.
When the purchaser makes use in Virginia of fixtures and equipment leased back from an out-of-state leasing company, the purchaser will be liable for paying the Virginia sales tax to the leasing company, but if such a tax is not collected for any reason the purchaser will be liable for the Virginia use tax.
I trust that this will answer completely the questions posed in your letter, but please feel free to contact the department if you have any further questions.
W. H. Forst
Tax Commissioner
Dear ****
This will reply to your letter of July 30, 1985, in which you submit a request for a ruling on the application of the sales and use tax to a sale and leaseback situation.
In the situation presented in your letter, a Virginia design company purchases fixtures and equipment for resale and imports them into Virginia for storage at a bonded warehouse. The design company will then sell such items to purchasers who may or may not be located in Virginia, with delivery to the purchasers being made by the design company's own vehicles. The purchasers in turn resell the fixtures and equipment to a leasing company which leases the items back to the purchasers.
Based upon the factual situation presented in your letter, the purchase of fixtures and equipment by the Virginia design company is an exempt sale for resale, provided that no use is made of the items prior to their resale. The sale from the purchaser to the leasing company also is an exempt for resale, again provided that the purchaser makes no use of the items prior to their resale. As the sales and use tax is applicable to the ultimate user or consumer of tangible personal property, you are correct in that the tax would be applicable in this situation only to the leaseback from the leasing company to the purchaser, provided of course that the purchaser makes use of the leased back property in Virginia.
When the purchaser makes use in Virginia of fixtures and equipment leased back from an out-of-state leasing company, the purchaser will be liable for paying the Virginia sales tax to the leasing company, but if such a tax is not collected for any reason the purchaser will be liable for the Virginia use tax.
I trust that this will answer completely the questions posed in your letter, but please feel free to contact the department if you have any further questions.
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner