Tax Type
Retail Sales and Use Tax
Description
Equipment leased to farmers and common carriers
Topic
Exemptions
Date Issued
07-23-1990
July 23, 1990
Re: Request for Ruling/Sales and Use Tax
Dear ****
This will reply to your letter dated January 15, 1990, in which you request a ruling on the applicability of the sales tax to charges for property tax on property leased to various individuals.
FACTS
*****, the "Taxpayer", is a lessor of tangible personal property, most of which is used in agricultural production. The Taxpayer pays property taxes on leased equipment to the localities and in turn charges the equipment lessee the property tax as provided for in the lease. It requests a ruling on the applicability of the sales tax to these charges for property tax in various situations.
RULING
Generally - Virginia Code §58.1-603(2) imposes the sales tax on "the gross proceeds derived from the lease or rental of tangible personal property." Virginia Retail Sales and Use Tax Regulation 630-10-57 (copy enclosed) provides that "[t]he term 'gross proceeds' includes any finance or interest charges, insurance charges, charges for property tax on the property being leased, and other similar charges." (emphasis added)
Farmers - Virginia Code §58.1-608(2)(b) provides an exemption from the sales and use tax for farm machinery necessary for use in agricultural production for market. Thus, leases of farm machinery or equipment would not be subject to the sales tax provided they are leased under a certificate of exemption. Similarly, any additional charges such as finance or interest charges, charges for property tax on the property tax being leased and other similar charges would not be subject to the tax.
Common Carriers of Property by Motor Vehicle - Virginia Code §58.1-608(3)(c) provides an exemption from the sales tax for:
-
- [t]angible personal property sold or leased to (i) a public service corporation subject to a state franchise or license tax upon gross receipts,...for the use or consumption by such corporation, company,...directly in the rendition of its public service, and tangible personal property sold or leased to a public service corporation engaged in business as a common carrier of property or passengers by motor vehicle or railway, for use or consumption by such common carrier directly in the rendition of its public service.
- [t]angible personal property sold or leased to (i) a public service corporation subject to a state franchise or license tax upon gross receipts,...for the use or consumption by such corporation, company,...directly in the rendition of its public service, and tangible personal property sold or leased to a public service corporation engaged in business as a common carrier of property or passengers by motor vehicle or railway, for use or consumption by such common carrier directly in the rendition of its public service.
Thus, in the case you presented involving a lease to a trucker licensed with the Interstate Commerce Commission, the lease as well as any additional charges, including property tax charges, would not be subject to the sales tax.
However, in the case where tangible personal property is leased to a trucker who does not hold an Interstate Commerce Commission permit, provided he is not operating under a certificate of convenience and necessity issued by the State Corporation Commission, the "gross proceeds" derived from the lease, including property tax charges, would be subject to the sales tax. Additionally, if the trucker is a contract carrier or carrier other than a common carrier of property by motor vehicle, the gross proceeds from his lease would be subject to the tax.
If you have any further questions regarding this matter, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner