Virginia Sales Tax On Maintenance Agreements

The taxpayer offered training in 2010, a few months before the customer purchased the software and maintenance contract. The purpose of the training was to answer all questions about how the taxpayer`s product might work for the client. The taxpayer explained that the training was not grouped with the initial purchase of the software and that he believes that the training fees are exempt. Note: This article was published on November 6, 2014 and may not reflect potential changes to the 2018 revenue and usage tax. Company A is a non-governmental company that leases devices to customers in Virginia. Company A is not registered with the State of Virginia for collecting the virginia sales or use tax. Company A leases devices to customers in Virginia in two different scenarios. In the first scenario, the company buys, supplies, installs and waits for equipment for Virginia customers. In the second scenario, Company A purchases the equipment from a third party (“Company B”) and pays Company B a flat fee for the supply and installation of the equipment at Company A`s Virginia site. Company A also acquires lump sum maintenance contracts from Company B containing parts and/or workers to maintain the equipment at Company A`s Virginia site.

In addition, Company A may be billed by Company B for all parts and parts of work that are not in the maintenance contract for package. Company A also entered into a contractual agreement with Company C regarding the billing and collection of Company A customers in Virginia. Company C is registered for virginia VAT collection. Company C levies the monthly rents of the customer of Company A in Virginia, as well as the corresponding VAT on rental payments. Company C presents the rental payments it received on behalf of Company A, but pays directly to Virginia, under the registration number of Company C, the VAT collected on the leases. Neither Company A nor Company C obtained approval from the Ministry of Taxation for this collection and transfer procedure. Company A pays a fee to Company C for its collection services. On behalf of Company A, they are seeking a decision on the proper sale and use of tax applications in Virginia for transactions between Company A and Company B, as well as between Company A and Company C.

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