TRALA-Supported Virginia Legislation Addresses Motor Vehicle Rental Tax

January 11, 2012

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Delegate James Massie (R-Henrico) has introduced Virginia legislation, sponsored by the Truck Renting and Leasing Association, that would limit the types of revenue taxed under the commonwealth's 10% motor vehicle rental tax.
The bill (HB 322) would address administrative attempts to expand the definition of "gross proceeds" as they relate to collecting rental tax.

The need to define the definition of gross proceeds became apparent when the Virginia Department of Motor Vehicles issued a memo that said vehicle rental companies should be collecting the 10% motor vehicle rental tax not only for the rental agreement, but also on items such as parking tickets, delivery charges, pickup charges, recovery charges, pass through charges, transportation charges, and third party service charges. The DMV considers these charges as part of the gross proceeds from the rental despite the fact that none of these are typically listed on a rental agreement.

The motor vehicle rental tax applies rental transactions involving cars and trucks weighing up to 26,000 pounds rented for a period of less than twelve months.

According to TRALA's interpretation, several revenue sources listed as taxable should not be subject to the motor vehicle rental tax as they are not authorized in the Virginia Motor Vehicle Sales and Use Tax statutes or the accompanying Virginia Motor Vehicle Rental Taxes and Fees Rules and Regulations. Additionally, those same revenue sources would be specifically exempt from tax under Virginia law in any other circumstance.

HB 322 specifically lists in statute revenue sources that are excluded from the definition of "gross proceeds" subject to the motor vehicle rental tax.

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