Tax Type
Retail Sales and Use Tax
Description
Lease and rentals
Topic
Taxability of Persons and Transactions
Date Issued
08-26-1986
August 26, 1986
Re: §58.1-1821 Application/Sales and Use Tax
Dear ******************************
This will reply to your letter of March 19, 1986 seeking correction of an assessment issued in the above referenced case.
FACTS
Taxpayer is a professional corporation engaged in the general practice of law. Taxpayer was audited by the department and held subject to the sales and use tax on certain non-taxed items leased from a principal of the firm. Taxpayer contests the imposition of the tax on these items contending that its lessor is not in the business of renting tangible personal property and in the alternative that such lease represents an exempt "occasional sale" of tangible personal property.
DETERMINATION
§58.1-603 of the Virginia Code imposes the sales tax upon every person "who leases or rents... property within this state... [to the extent of] the gross proceeds derived from the lease or rental of [such] ... property, where the lease or rental of such property is an established business, or part of an established business, or the same is incidental or germane to such business." §58.1-602(1) of the Code then defines "business" to mean, "any activity engaged in by any person, or caused to be engaged in by him with the object of gain, benefit or advantage, either directly or indirectly."
Furthermore, any 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. Thereafter, the tax is a debt from the lessee to the dealer until paid and is recoverable at law in the same manner as other debts. (See §§630-10-24(A) and 630-10-57(A) of the regulations).
Accordingly, while neither of the parties to the lease in the present case may be considered to be involved in the routine leasing of tangible personal property, it is beyond dispute that taxpayer's lessor is involved in an activity with the object of gain, benefit or advantage. In addition, it is reasonable to assume that the lease agreement in this case enabled taxpayer to avoid having to purchase, subject to the tax, some of the same items provided under the lease.
Nor does the lease in the present case qualify as an "occasional sale" for purposes of exemption from the sales and use tax. §58.1-602(12) of the Virginia Code defines an "occasional sale" to mean:
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- "a sale of tangible personal property not held or used by a seller in the course of an activity for which he is required to hold a certificate of registration, including the sale or exchange of all or substantially all the assets of any business and the reorganization or liquidation of any business, provided such sale or exchange is not one of a series of sales and exchanges sufficient in number, scope and character to constitute an activity requiring the holding of a certificate of registration." (emphasis added)
- "a sale of tangible personal property not held or used by a seller in the course of an activity for which he is required to hold a certificate of registration, including the sale or exchange of all or substantially all the assets of any business and the reorganization or liquidation of any business, provided such sale or exchange is not one of a series of sales and exchanges sufficient in number, scope and character to constitute an activity requiring the holding of a certificate of registration." (emphasis added)
Based on all of the foregoing, I find no basis for correction of the assessment in this case.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner