Tax Type
Retail Sales and Use Tax
Description
Leases or Rentals; Payment of Tax in Advance
Topic
Taxability of Persons and Transactions
Date Issued
08-26-1991
August 26, 1991
Re: Request for Ruling: Sales and Use Tax
Dear********************
This will reply to your letter of March 25, 1991 in which you request a ruling on the collection of sales and use tax on lease payments.
FACTS
*************(the Taxpayer) is in the business of leasing tangible personal property. A lessee has paid the sales tax up front on the total lease amount instead of paying the sales tax on a monthly basis throughout the term of the lease. The Taxpayer is questioning whether this option of paying all sales tax up front is available to the lessee.
RULING
Virginia Regulation (VR) 630-10-57 deals with leases and rentals and states, in part, "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 the gross proceeds." This regulation goes on to define "gross proceeds" as, "the charges made or voluntary contributions received for the lease or rental of tangible personal property computed with the same deductions, where applicable, as for sales price in [VR] 630-10-95."
There are no provisions in Virginia law or the regulations that would prohibit the payment of the sales tax up front on the total lease amount. This method of tax payment is purely at the discretion of the lessee. Should the lessee elect to pay the sales tax in this manner, the tax must be based upon the total lease amount, i.e. the sum of the periodic lease payments over the term of the lease. The dealer must remit such tax to the department for the period in which it was collected.
I would also like to point out that full payment of the tax up front on the total lease amount would not preclude the lessee of additional tax liability should the tax rate change during the term of the lease.
If you should have any further questions, please feel free to contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner