Tax Type
Retail Sales and Use Tax
Description
Future use for rental; Replacement or revised parts manuals
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
07-02-1990
July 2, 1990
Re: Request for Ruling/Sales and Use Tax
Dear**********************
This will respond to your letter dated January 4, 1990 in which you request a ruling on the applicability of the retail sales and use tax to parts manuals for the equipment your company leases.
FACTS
"the "Taxpayer", is in the business of leasing and selling equipment. In a recent sales and use tax audit, it was informed by the department that it is required to pay sales tax on parts manuals for its rental equipment.
The Taxpayer disagrees with this based on the fact that when the equipment is shipped to it, the parts manual is included as part of the equipment. If the manual is lost, the Taxpayer has to pay for a replacement manual. Additionally, the manual is listed as a part in vendor catalogs and has a part number.
The Taxpayer requests a ruling on the correct application of the sales and use tax to the parts for the equipment it leases.
RULING
Virginia Retail Sales and Use Tax Regulation 630-10-57 provides that "[t]angible 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." Thus, equipment purchased by the Taxpayer for taxable lease or rental, or for resale, is exempt from the tax.
Generally, instruction booklets and parts manuals are provided by a manufacturer with equipment and the costs of such are included in the equipment price. In those instances in which the parts manuals are provided by the manufacturer with the equipment, no tax is due. However, in those instances in which the Taxpayer purchases a replacement or revised manual from its vendor, it is required to pay the sales tax, unless the manual will be resold to the lessee. A parts manual is treated in the same manner as repair parts for tax purposes. Repair parts purchased by the Taxpayer for installation on equipment it leases would be subject to the tax, unless the contract agreed to by the Taxpayer and the lessee indicated that the lessee would be required to purchase the repair parts from the Taxpayer. In that case, the repair part could be purchased under a resale exemption certificate and would be taxable to the lessee.
Based on the information presented, there is nothing to indicate that the Taxpayer resells or leases the parts manuals to the lessee. The manual is merely provided with the equipment for general information and guidance purposes. Thus, the Taxpayer is required to pay the sales tax on replacement or revised parts manuals purchased from its vendors.
If you have any further questions regarding this matter, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
See PD 90 -193
Rulings of the Tax Commissioner