Tax Type
Retail Sales and Use Tax
Description
Cargo metal containers and trailers
Topic
Property Subject to Tax
Date Issued
07-02-1986
July 2, 1986
Re: §58.1-1821 Application/Sales and Use Tax
Dear******************
This will reply to your letter of January 16, 1986 requesting correction of an audit assessment issued in the above referenced case for the period July, 1982 through May, 1985.
FACTS
************** (taxpayer), was assessed sales and use tax for its failure to collect and report the tax in connection with its sale and/or lease of certain used cargo metal containers and trailers and on purchases of tangible personal property for its own use or consumption, (ie., equipment and supplies), for which no sales tax was paid nor use tax remitted to the department. Taxpayer contends that its container sales were made subject to the tax or were exempt of the tax based on certificates of exemption presented by purchasers. However, it is our understanding that while such tax may have been collected by taxpayer, it was never remitted to the department.
Taxpayer contends further, with respect to its trailer rentals, that subsequent to a prior sales and use tax audit it was instructed by the department's auditor to contact the Department of Motor Vehicles (DMV), to ascertain whether such rentals were subject to the motor vehicle sales and use tax. Taxpayer asserts that it was informed by DMV that its trailer rentals were not subject to the motor vehicle sales and use tax. However, it is our further understanding that taxpayer was also instructed by the department's auditor to collect and report the 4% retail sales and use tax on such trailer rentals in the event it was informed by DMV that such rentals were not subject to the motor vehicle sales and use tax.
Lastly, taxpayer requests that an adjustment be made to the audit to reflect its costs of delivering such trailers to customers.
DETERMINATION
§58.1-603 of the Virginia Code imposes the retail sales tax on "the gross sales price of each item or article of tangible personal property when sold at retail or distributed in this State...[and on] the gross proceeds derived from the lease or rental of tangible personal property, where the lease or rental of such property is part of an established business, or... is incidental or germane to such business."
Furthermore, §630-10-57 of the Virginia Retail Sales and Use Tax Regulations provides that, "[a]ny person engaged in the business of leasing or renting tangible personal property to others is required to register as a dealer and collect and pay the tax on "gross proceeds". Gross proceeds is then defined by the regulations as "the charges made or... received for the lease or rental of tangible personal property."
Since, according to the department's records, taxpayer failed to remit the tax on its container rentals or sales, and on certain purchases of equipment and supplies, I find no basis for adjustment of the audit on either of these two issues.
In addition, it has been the department's consistent position that all sales, leases and rentals of motor vehicles which are not subject to the motor vehicle sales and use tax and on which such tax has not been paid, are subject to the retail sales and use tax. (See copies of current §630-10-67 and former §1-67 of the regulations, attached.) Therefore, since taxpayer did not remit the motor vehicle sales and use tax to DMV on its sales or leases of trailers, it was properly held subject to the retail sales and use tax on such items in the audit.
Nor do I find basis at this time for any adjustment of the audit for taxpayer's costs of delivering such trailers to customers. §630-10-107 of the regulations provides in part that "[t]he tax does not apply to transportation or delivery charges added to a taxable sale provided such transportation charges are separately stated on the invoice to the customer." (Emphasis added) (See copy of §630-10-107 attached.) Inasmuch as we have no evidence of any such transportation charges in the present case being separately stated on invoices to taxpayer's customers, I find no basis to adjust the audit on this issue. However, if taxpayer can submit such evidence within 30 days of the date of this letter to the department's Technical Services Section, P.O. Box 6-L, Richmond, Virginia 23282, I will consider adjusting the audit on this basis.
Based on all of the foregoing, I find no basis for correction of any portion of the audit assessment in this case at this time. However, if taxpayer is able to produce, within 30 days of the date of this letter, the proof requested above, I will consider adjustment of the audit based on such information.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner