Tax Type
Retail Sales and Use Tax
Description
Gas cylinders; Third party leases
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
11-01-1989
November 1, 1989
Re: §58.1-1821 Application: Sales and Use Tax
Dear****************
This is in reply to your letter of May 31, 1989, on behalf of********* (taxpayer), in which you are seeking relief of tax, penalty and interest assessed on a recent sales and use tax audit for the period November 1985 through September 1988.
FACTS
The taxpayer is in the business of selling welding supplies, including gases such as oxygen, acetylene, etc. The taxpayer leases gas cylinders from a third party. In turn, the taxpayer makes a separate lease charge to their customers on which the sales tax is collected and remitted to the state. The auditor assessed the taxpayer the sales tax on his leases of the gas cylinders from the third party. The taxpayer is contesting the taxing of cylinder as being double taxation since they are collecting the sales tax on the subsequent leases to their customers.
DETERMINATION
§630-10-57 of the Virginia Retail Sales and Use Tax Regulations deals with leases and rentals and states, in part, the following:
-
- 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... Tangible personal property for future use by a person for taxable lease or rental as an established business may be purchased tax exempt under a certificate of exemption.
Virginia Code §58.1-603(2) imposes the sales tax on "the gross proceeds derived from the lease or rental of tangible personal 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." The Taxpayer has demonstrated that it is an established business which in it's normal course of everyday operations leases gas cylinders to it's customers.
In view of the Regulation and Code sections stated above, and the fact the taxpayer has collected and remitted the sales tax on the lease of gas cylinders to its customers, the department will remove the gas cylinders leased by the taxpayer from the audit and the assessment will be adjusted accordingly.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner