Tax Type
Retail Sales and Use Tax
Description
Leases and rentals; Insurance charges
Topic
Taxability of Persons and Transactions
Date Issued
03-20-1995
March 20, 1995
Re: §58.1-1821 Application: Sales & Use Tax
Dear**************
This will reply to your letter regarding the department's sales tax assessment as a result of an audit of your company, ***********(the "Taxpayer"). I note that the assessments have been paid in full.
FACTS
In connection with its business as a lessor of various equipment, the Taxpayer was audited and held liable for sales tax on certain untaxed charges made to its lessees. The Taxpayer contests the application of the tax to separately stated charges for "property insurance". The Taxpayer provides that in a previous audit, such charges were not taxed, nor were they informed that such charges should be subject to the tax. Since this is a new audit issue, they request that the charges be removed from the audit and that the appropriate taxes and interest be refunded.
DETERMINATION
Code of Virginia §58.1-602 states that the term "Lease or Rental "[m]eans the leasing or renting of tangible personal property and the possession or use thereof by the lessee or renter for a consideration, without transfer of the title to such property."
Virginia Regulations (VR) 630-10-57(A) provides that "Any person engaged in the business of leasing or renting tangible personal property to others is required to... collect and pay the tax on the gross proceeds." Subsection B. provides further that "The 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). The previous wording was included in the revision of the Virginia Retail Sales and Use Tax Regulations effective January 1, 1985.
Based upon the regulations, the department's assessment clearly is correct and I understand that the Taxpayer does not contest the department's policy of insurance charges. Instead, the Taxpayer feels the policy should be applied prospectively since similar charges were not taxed in a prior audit.
However, a member of my staff requested and received a copy of an invoice and credit memo included in the calculation of the Taxpayer's previous audit. The invoice reflects rental charges for the equipment, charges for rental accessories, and charges for property insurance. The credit memo reflects credits for the equipment and the rental accessories, but does not give credit for any portion of the insurance charges. The net rental charge, therefore, was inclusive of the insurance charge, which was then used as the basis for the projection of the sales deficiency for that audit period. As the previous audit apparently included insurance charges, there is no basis to allow any adjustment to the current audit.
If you are in need of any additional assistance, please contact ********of the department's Office of Tax Policy at**********
-
-
-
-
-
-
-
-
-
-
-
- Sincerely,
Danny M. Payne
Tax Commissioner
- Sincerely,
-
-
-
-
-
-
-
-
-
-
Rulings of the Tax Commissioner