Tax Type
Retail Sales and Use Tax
Taxes of Other Agencies
Description
Storage trailers
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
06-29-1988
June 29, 1988
Re: Ruling Request/ Special Use Tax
Dear***************
This will reply to your letter of May 12, 1988 seeking information on the application of the special use tax recently enacted by the Virginia General Assembly to storage trailers leased by ********** (taxpayer) for use in construction contracts in Virginia.
FACTS
According to your letter, the taxpayer is a nonresident contractor with division offices located in North Carolina and Virginia. Both the taxpayer's in-state and out-of-state divisions lease storage trailers from unrelated third parties in connection with construction projects in Virginia. Accordingly, you request a ruling whether the recently enacted special use tax applies to such trailers.
DETERMINATION
Effective March 30, 1988, §58.1-604.1 of the Virginia Code imposes a special use tax "upon the storage or use of all motor vehicles, machines, machinery, tools or other equipment brought, imported or caused to be brought into [Virginia] for use in ...[construction contracts.] This section also provides that the rate of the special use tax is 3 1/2%, "except motor vehicles which ... tare] taxed at the rate of 3%; aircraft which ... [are] taxed at a rate of 2%; and watercraft which... tare] taxed at a rate of 2% with a maximum tax of $1,000."
Furthermore, this Code section provides in pertinent part that "[a] transaction taxed under... [Va. Code] §58.1-2402 shall not also be taxed under this section." In addition, Virginia Code §58.1-604.3 provides that the special use tax does not apply to "property brought into [Virginia] by a resident of another state, if such [other] state does not impose a similar use tax on Virginia contractors..."
The department recently issued Virginia Tax Bulletin 88-11, copy enclosed, to explain the provisions of the special use tax, and is currently developing forms and instructions for the quarterly reporting of the tax.
By ruling letter dated June 2, 1987, copy enclosed, the department determined that trailers leased to contractors for use at construction sites are subject to the motor vehicle sales tax and are therefore not subject to the retail sales and use tax.
Based on the foregoing, if the taxpayer's trailers are subject to the motor vehicle sales and use tax imposed under Virginia Code 58.1-2402, they will not be subject to the special use tax outlined above. The special use tax would apply to the taxpayer's trailers only if they are:
- registered in Virginia for the first time bearing valid out-of-state titles or registrations and therefore qualify for exemption from the motor vehicle sales and use tax under Virginia Code §58.1-2403; or
- subject to the out-of-state tax credit provisions of Virginia Code §58.1-2424 and no Virginia motor vehicle sales and use tax is due.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner