(a)
Introduction. This
ruling supersedes Rulings Numbers 74, 76, 77, 78 and 132, and becomes effective
upon the date of issue (See 6 Pa.B. 9 (January 2, 1976)). Upon its effective
date, the 16 2/3% exemption under former Ruling No. 76, pertaining to charges
for gasoline, is no longer in effect. This ruling also pertains to the
taxability of rolling stock for the period from March 4, 1971, through October
16, 1974. Prior and subsequent to this period, rolling stock was and is
specifically excluded from taxability by statutory amendment. See subsection
(c)(1)(i)(B).
(b)
Definitions. The following words and terms, when used in this
section, have the following meanings, unless the context clearly indicates
otherwise:
Lease agreement-A contract whereby the
lessee obtains or has the right to possession or custody of a vehicle in
exchange for lease payments.
Lease payments-Full consideration paid
or delivered or promised to be paid or delivered to the lessor for a lease
period under a lease agreement, whether it be money or otherwise, even though
consideration is separately stated and designated as payment for service,
maintenance, insurance, repairs, depreciation or otherwise.
(i)
Maintenance, insurance or repairs
obtained by lessee. When a lessee is required pursuant to a lease
agreement to provide or obtain maintenance, insurance or repairs, any payment
made by the lessee to a vendor other than the lessor for maintenance, insurance
or repairs shall be included by the lessor as part of the lease payments for
the purpose of computing tax, unless tax was charged by the vendor who provided
the maintenance, insurance or repairs.
(ii)
Gasoline charges.
Separate sales of gasoline by a lessor to a lessee are not subject to tax. A
transfer of gasoline to a lessee is not considered to be a separate sale unless
the bill or sales invoice to the lessee separately states the number of gallons
of gasoline transferred, and either the charge per gallon or the total charges
made for gasoline. Charges for gasoline computed on the basis of the mileage a
leased vehicle is driven, rather than upon the actual quantity of gasoline
transferred to the lessee, are therefore subject to tax.
Lease period-The interval of time
established by the lessor and lessee which occurs between successive lease
payments in accordance with the lease agreement, but this interval may not
exceed 31 days. In circumstances when the lessor and lessee establish an
interval between successive payments which exceeds 31 days, the Department will
assume lease periods on a month-to-month basis beginning with the first day of
the first complete month subsequent to the execution of the lease
agreement.
Lessor-A person who is engaged in the
business of leasing or renting vehicles.
Public utility common carrier-A public
utility common carrier is a public utility which is registered as a common
carrier with either the Pennsylvania Public Utility Commission or the
Interstate Commerce Commission and is organized to perform, and does, in fact,
perform services affected with a public interest, and which holds itself out to
the general public to carry goods or persons without discrimination and for
compensation. An independent contractor (that is, one who reserves the right to
refuse to serve any person at his discretion and the power to fix his rates or
charges by individual contract with the person or persons with whom he
contracts) is not a common carrier.
Resident-A person who is domiciled in
this Commonwealth, maintaining a permanent place of abode within this
Commonwealth and spends in the aggregate more than 60 days of the year within
this Commonwealth, incorporated under the law of the Commonwealth, authorized
to do business or doing business within this Commonwealth, or maintaining a
place of business within the Commonwealth.
Rolling stock-A device which is used
exclusively upon stationary rails or tracks, including, but not limited to,
locomotives, flat cars, box cars, coal cars, coaches, cabooses and other
railroad cars. Rolling stock includes the type of property described even
though it may be owned by persons other than railroads.
Vehicle-A device in, upon or by which a
person or property is or may be transported or drawn, including, but not
limited to, automobiles, trucks, trailers, tractors, power shovels, road
machinery and agricultural machinery. The term does not include devices moved
by human power, vehicles which are designed to travel solely through air or
water, or a device which is used exclusively upon stationary rails or
tracks.
(c)
Scope. Use of vehicles and rolling stock is subject to tax as
follows:
(1)
Vehicles.
Taxability of vehicles shall conform with the following:
(i)
Taxability of lease
payments. Taxability of lease payments shall conform with the
following:
(A)
Leases executed within
this Commonwealth. All lease payments made in accordance with lease
agreements executed within this Commonwealth are subject to tax.
(B)
Leases executed outside this
Commonwealth. Leases executed outside this Commonwealth shall conform
with the following:
(I)
Resident. A lease payment made in accordance with a lease
agreement executed outside this Commonwealth by a resident is subject to tax if
during the corresponding lease period the vehicle is brought within the
geographical boundaries of this Commonwealth; unless, the lessee is otherwise
exempt under subsection (d).
(II)
Nonresident. A lease payment made in accordance with a lease
agreement executed outside this Commonwealth by a nonresident lessee is subject
to tax if during the corresponding lease period the vehicle is used within the
Commonwealth more than 7 days; unless, the nonresident lessee is exempt as a
tourist or vacationer or is otherwise exempt under subsection (d).
(C)
Lease with option to
buy. When a lease agreement involves an option to buy, sales tax is
applicable to lease payments as well as any payment made in exercising the
option to buy.
(ii)
Use of vehicles or parts therefor by lessors. Use of vehicles
or parts therefor by lessors shall conform with the following:
(A)
Resident. A vehicle or
parts therefor used within this Commonwealth by a resident lessor for a purpose
other than leasing makes the property subject to use tax based on the purchase
price paid by the lessor in his initial purchase of the property. However, if
the property was purchased more than 6 months prior to its first taxable use,
tax may be computed and reported on the fair market value of the property at
the time of such taxable use.
(B)
Nonresident. The use of a vehicle or parts therefor within
this Commonwealth for a period of more than 7 days, for any purpose other than
leasing, makes the property subject to use tax if the lessor is not a tourist
or vacationer. Tax is based on the original purchase price; or if purchased
more than 6 months prior to its first taxable use, then on the fair market
value at the time of the taxable use. The option of basing the tax on the fair
market value is an election which shall be made by the taxpayer.
(2)
Rolling
stock. Taxability of rolling stock shall conform with the following:
(i)
Taxable period. Lease
payments made from March 4, 1971, through October 16, 1974, for the leasing of
rolling stock are subject to tax in precisely the same manner as lease payments
for the leasing of vehicles under paragraph (1)(i). Thus, the taxability of
lease payments made for the leasing of rolling stock may be determined by
substituting rolling stock for vehicles in paragraph (1)(i). Similarly, the use
of rolling stock within this Commonwealth from March 4, 1971, through October
16, 1974, is subject to tax in precisely the same manner as the use of vehicles
under paragraph (1)(i)(B)(II). Thus, tax liability for the use of rolling stock
during this period may be determined by substituting rolling stock for vehicles
in paragraph (1)(ii). Subsections (d)-(f), dealing with exemptions, credits
against tax, and procedures, also apply to the leasing or rental of rolling
stock during the taxable period.
(ii)
Nontaxable period.
Lease payments made prior to March 4, 1971, or subsequent to October 16, 1974,
for the leasing of rolling stock are specifically excluded from tax by
statutory amendment. Similarly, the use of rolling stock within this
Commonwealth prior to March 4, 1971, or subsequent to October 16, 1974, is
specifically excluded from tax by statutory amendment.
(d)
Exemptions.
Exemptions shall conform with the following:
(1)
Purchases of vehicles or parts,
lubricants or repairs therefor by lessors. Lessors are not subject to
tax upon their purchase or lease of vehicles which are purchased for leasing.
Also, repair services, repair parts, replacement parts or lubricants purchased
for vehicles which are used for leasing are exempt from tax. This exemption
does not apply to tools, equipment and supplies used in connection with the
repairing or servicing of leased vehicles.
(2)
Lease by exempt
organizations. A vehicle leased by any one of the following
individuals or organizations is exempt from tax:
(i) Charitable organization, volunteer
firemen's organization, religious organization or nonprofit educational
institution if the vehicle is for use in any activity which bears a reasonable
relationship to the purpose for which the organization or institution exists.
See §
32.21 (relating to charitable,
volunteer firemen's and religious organizations, and nonprofit educational
institutions).
(ii) United States
Government. See §
32.22 (relating to sales to the
United States Government or within areas subject to the jurisdiction of the
Federal Government).
(iii)
Commonwealth of Pennsylvania or its political subdivisions. See §
32.23 (relating to sales to the
Commonwealth or its political subdivisions and sales by the Commonwealth and
its political subdivisions).
(iv)
Ambassadors, ministers and consular officers of foreign governments. See §
32.24 (relating to sales to
ambassadors, ministers and consular officers of foreign governments).
(v) Federal credit unions organized under the
provisions of the Federal Credit Union Act (12 U.S.C.A. §§
1751 -
1795k). See §
48.4 (relating to credit
unions).
(vi) Pennsylvania credit
unions formed and incorporated under
17 Pa.C.S. §§
101-
1504 (relating to the Credit Union Code).
See §
48.4.
(vii) Public
authorities created under the Municipal Authorities Acts of 1945 (
53 P. S. §§
301-
322). See §
32.23.
(viii) Cooperative
agricultural associations required to pay corporate net income tax under the
provisions of the Co-operative Agricultural Association Corporate Net Income
Tax Act (72 P. S. §§ 3420-21-3420-30). See §
44.2 (relating to cooperative
agricultural associations).
(ix)
Electric cooperative corporations formed under
15 Pa.C.S. §§
7301-
7359 (relating to the Electric
Cooperative Law of 1990). See §
45.1 (relating to exemption of
electric cooperative corporations).
(x) Any other organization claiming an exempt
status under a particular statute shall make application to the Bureau of Sales
and Use Tax (Attention: Legal Division) for approval to use the
exemption.
(3)
Public utility common carrier exemption. The lease of vehicles
by a public utility common carrier, engaged in business as a common carrier is
exempt from tax if the vehicles are predominantly used directly by the lessee
in performing a public utility service. This exemption also applies to the
purchase of supplies, repair parts and accessories for such vehicles. The lease
of vehicles as well as supplies, repair parts and accessories for the vehicles
by any other public utility service are subject to tax.
(4)
Manufacturing, processing or
farming exemptions. The manufacturing, processing or farming exemption
does not apply to the lease of any vehicles required to be registered under
75 Pa.C.S. §§
101-9821. Supplies, repair parts or
accessories for the vehicles are taxable unless purchased by the
lessor.
(e)
Credits against tax. A credit against tax shall be granted,
with respect to vehicles purchased or leased for use outside this Commonwealth,
equal to the tax paid to another state by reason of the imposition by the other
state of a tax similar to the tax imposed by Article II of the TRC
(72 P. S. §§
7201-7282), provided,
however, that no credit shall be granted unless such other state grants
substantially similar tax relief by reason of the payment of tax under Article
II of the TRC. Tax paid by a lessor on his purchase of vehicles cannot be
credited against taxes due from a lessee to the lessor on lease payments. A
credit listing of the states can be obtained upon request from this
Bureau.
(f)
Procedures. Procedures for records and claiming exemptions
shall conform with the following:
(1)
Records. All lessors shall keep books that enable the
Department to accurately determine at any time the amount of tax collected and
remitted upon each individual vehicle. The lessor shall identify each vehicle
by reference to the specific registration number and state of registration. The
identification shall be made upon the books and records of the lessor and upon
all billings and invoices to customers.
(2)
Procedure for claiming
exemption. A lessee claiming exemption must tender to the lessor a
properly executed Blanket Exemption Certificate.
