Tax Type
Retail Sales and Use Tax
Description
Leases and rentals; Golf equipment
Topic
Taxability of Persons and Transactions
Date Issued
03-11-1996
See P.D. 97-169 for correction
Re: Request for Ruling: Retail Sales & Use Tax
Dear*********
This will reply to your letter of December 19, 1996 in which****** (the "Taxpayer"), seeks a ruling on two issues. The first concerns maintenance contract charges where the transfer of tangible personal property is separately stated and charged. The second issue involves the application of tax on the rental of golf hand carts, golf riding carts, and golf balls for use on a driving range which is part of a semi-private golf course.
The Taxpayer has entered into a software support maintenance agreement. The terms of the agreement allow for the provision of parts and labor and specifically provide that:
You question the applicability of tax to the agreement in light of the fact that a nominal separate charge is made for the disk or other media.
The Taxpayer questions the application of tax on the rental of golf hand carts, golf riding carts, and golf balls on a golf driving range. All rentals are associated with the operations of a semi-private golf course.
Maintenance Support Agreements
As demonstrated by Virginia Regulation (VR) 630-10-62.1 and numerous rulings by the department [e.g., see P.D.'s 91-20 (2/22/91), and 92-196 (9/30/92), copies enclosed], the department has consistently held that the total charge for a computer software maintenance contract, which provides for the furnishing of tangible enhancements or updates or any other tangible replacement property, is taxable at the time of purchase. VR 630-10-62.1 (D) further provides that "[t]he tax will apply to the total charge for such contracts, regardless of the fact that the contract may specify separate charges for parts and labor...." Accordingly, l find that the charges related to the maintenance contract are taxable inclusive of any fees that may be associated with separate charges for the type of medium upon which the enhancements are sent.
Please note, however, that the 1994 General Assembly passed legislation (SB 28), effective January 1, 1996, to exempt from the sales and use tax one-half of the total charge for maintenance contracts, when such contracts provide for both repair or replacement parts and repair labor. (See enclosed Tax Bulletin 95-8 (9/27/95). Therefore, for any parts and labor contracts entered into on or after January 1, 1996, only 50% of the total charge would be taxable.
Rental of Golfing Equipment
I have enclosed a copy of VR 630-10-23 which describes department policy with respect to the rental of golf balls on a driving range, and the rental of golf hand carts, and riding carts, all within the confines and operations of private, semi-private or public golf courses. The regulations provide that such rentals are taxable. Also enclosed is VR 630-10-65.1 which specifically provides that charges to a customer for the rental of golf balls with respect to miniature golf courses and driving ranges not associated with private, semi-private or public golf courses are not taxable.
I trust the foregoing has responded to your concerns. If you should have any additional questions regarding this matter, please contact **** of the department's Office of Tax Policy, at***********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/107712Q
March 11, 1996
Re: Request for Ruling: Retail Sales & Use Tax
Dear*********
This will reply to your letter of December 19, 1996 in which****** (the "Taxpayer"), seeks a ruling on two issues. The first concerns maintenance contract charges where the transfer of tangible personal property is separately stated and charged. The second issue involves the application of tax on the rental of golf hand carts, golf riding carts, and golf balls for use on a driving range which is part of a semi-private golf course.
FACTS
The Taxpayer has entered into a software support maintenance agreement. The terms of the agreement allow for the provision of parts and labor and specifically provide that:
-
- periodic enhancements and corrections will be distributed on a disk as they are released by [support group]. It is the user's responsibility to install any enhancements of either application or systems software and purchase the disk or other media.
You question the applicability of tax to the agreement in light of the fact that a nominal separate charge is made for the disk or other media.
The Taxpayer questions the application of tax on the rental of golf hand carts, golf riding carts, and golf balls on a golf driving range. All rentals are associated with the operations of a semi-private golf course.
RULING
Maintenance Support Agreements
As demonstrated by Virginia Regulation (VR) 630-10-62.1 and numerous rulings by the department [e.g., see P.D.'s 91-20 (2/22/91), and 92-196 (9/30/92), copies enclosed], the department has consistently held that the total charge for a computer software maintenance contract, which provides for the furnishing of tangible enhancements or updates or any other tangible replacement property, is taxable at the time of purchase. VR 630-10-62.1 (D) further provides that "[t]he tax will apply to the total charge for such contracts, regardless of the fact that the contract may specify separate charges for parts and labor...." Accordingly, l find that the charges related to the maintenance contract are taxable inclusive of any fees that may be associated with separate charges for the type of medium upon which the enhancements are sent.
Please note, however, that the 1994 General Assembly passed legislation (SB 28), effective January 1, 1996, to exempt from the sales and use tax one-half of the total charge for maintenance contracts, when such contracts provide for both repair or replacement parts and repair labor. (See enclosed Tax Bulletin 95-8 (9/27/95). Therefore, for any parts and labor contracts entered into on or after January 1, 1996, only 50% of the total charge would be taxable.
Rental of Golfing Equipment
I have enclosed a copy of VR 630-10-23 which describes department policy with respect to the rental of golf balls on a driving range, and the rental of golf hand carts, and riding carts, all within the confines and operations of private, semi-private or public golf courses. The regulations provide that such rentals are taxable. Also enclosed is VR 630-10-65.1 which specifically provides that charges to a customer for the rental of golf balls with respect to miniature golf courses and driving ranges not associated with private, semi-private or public golf courses are not taxable.
I trust the foregoing has responded to your concerns. If you should have any additional questions regarding this matter, please contact **** of the department's Office of Tax Policy, at***********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/107712Q
Related Documents
Rulings of the Tax Commissioner