Tax Type
Retail Sales and Use Tax
Description
Computer lease
Topic
Taxability of Persons and Transactions
Date Issued
06-23-1986
June 23, 1986
Re: §58.1-1821 Application/Sales and Use Tax
Dear ******************
This will reply to your letter of April 24, 1986, in which you submit an application for relief of interest assessed to *********** as the result of a recent audit.
You note in your letter that the interest charges in question relate to tax assessed on the lease of a computer from a large national corporation. You also state that your firm did not furnish the lessor with an exemption certificate of any type and therefore, you feel that the lessor should have collected the tax from your firm on each lease payment. Because the lessor, whom you feel should have been familiar with the Virginia sales and use tax law, failed to collect the tax, you contend that the department should seek the payment of interest in this case from the lessor and not from Your firm.
While I empathize with the situation of a small firm such as yours and understand completely that the failure to remit the tax was inadvertent, it must be noted that the sales and use tax is ultimately borne by the purchaser or lessee of tangible personal property. § 58.1-604 of the Code of Virginia imposes the sales tax upon sellers and lessors of tangible personal property and Virginia Code § 58.1-612 provides that the tax is collectable from dealers (sellers and lessors). However, Virginia Code § 58.1-625 provides that the tax is to be added by the dealer to the charge made a customer and makes the tax the legal debt of the purchaser. Therefore, as noted by the federal courts in United States v. Forst, 442 F. Supp. 920 (W.D. Va. 1977), aff'd. 569 F.2d 811 (4th Cir. 1978), the legal incidence of the sales and use tax is upon the purchaser.
Furthermore, the Virginia Supreme Court held in Commonwealth v. Miller-Morton, 220 Va. 852, 263 S.E.2d 413 (1980), that "the use tax...applies if the purchase (or lease) was made in Virginia but the sales tax was not paid " Therefore, even though the lessor may have improperly failed to collect the sales tax, the use tax automatically applies, a point noted specifically in § 630-10-109 of the Virginia Retail Sales and Use Tax Regulations.
Based upon the foregoing, the department was proper in seeking the payment of tax from your firm. As the assessment of tax was proper, the department was then bound by the provisions of Virginia Code § 58.1-1812 which mandates the application of interest to any assessment of tax. As the assessment of tax in this case was proper and the addition of interest to such assessment is required by law, r can find no statutory basis for granting relief to your firm and seeking payment of interest from the lessor. Therefore, the interest must remain due and payable by your firm.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner