61 Pa. Code § 47.17

Current through Register Vol. 54, No. 45, November 9, 2024

Section 47.17 - Lease or rental of vehicles and rolling stock

(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 Upon its effective date, the 16 2/3% exemption under former Ruling No. 76, pertaining to charges for gasoline, is no longer in effect.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.

61 Pa. Code § 47.17

The provisions of this §47.17 adopted January 2, 1976, effective 1/3/1976, 6 Pa.B. 9; amended March 19, 1993, effective 3/20/1993, 23 Pa.B. 1322.

This section cited in 61 Pa. Code § 31.41a (relating to scope).