Tax Type
Retail Sales and Use Tax
Description
Leaseback; Convenience store equipment
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
11-01-1989
November 1, 1989
Re: Ruling Request/ Sales and Use Tax
Dear**************
This will reply to your letters dated June 9,1989 and August 16, 1989 seeking a ruling on behalf of *********** (taxpayer) for possible recovery of sales tax paid.
FACTS
The taxpayer purchased various convenience store equipment, pumps, tanks, canopy and other related petroleum equipment on which it has paid to its vendors the applicable Virginia sales tax. Shortly after the purchases were made, the taxpayer secured financing for the equipment with a leasing company and entered into a sale and leaseback arrangement. The leasing company charges sales tax on the monthly rental fees it collects.
The taxpayer wishes to know whether it has incurred excessive sales tax liability by executing this specific financing transaction and if so, how to proceed in claiming a refund for the excess sales taxes paid.
RULING
The leasing company is properly collecting sales tax under Virginia Regulation §630-10-59 which states that a loan or finance company " ... engaged in selling, leasing or renting tangible personal property to consumers or users ... must register as a dealer and collect and pay the tax due ..."
Furthermore, the vendors from which the equipment has been initially purchased by the taxpayer have properly charged the sales tax to the taxpayer in the absence of notification of intent to involve a third party purchaser (i.e. the lease company). However, a vendor may be relieved retroactively of the responsibility for the collection of tax if the taxpayer furnishes a resale certificate of exemption inasmuch as it will resell the equipment to a third party.
Because in this case the assets were purchased by the taxpayer with the intention of reselling the equipment to the leasing company the taxpayer may obtain a refund of sales and use tax paid upon the original purchase of equipment which retains its identity as personal property subsequent to installation. Such refund should be requested of the applicable vendor(s).
The resale exemption will not apply to the original purchase of any property sold to the leasing company after becoming affixed to real property. However, the leaseback of such equipment is nontaxable.
I hope the foregoing information has answered your questions. However, please contact the department if you need additional information.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner