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Truck Renting and Leasing Association

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Virginia House Passes TRALA-Requested Bill Addressing Motor Vehicle Rental Tax

TRALA-requested legislation that would limit the definition of "gross proceeds" for purposes of Virginia's motor vehicle rental tax was unanimously pass by the Virginia House of Delegates yesterday. HB 1993 would explicitly exclude parking fines, delivery charges, pickup charges, delivery charges, pass-through charges, transportation charges, third party service charges, refueling surcharges, as well as other items that had already been excluded via regulation, from the definition of "gross proceeds" for purposes of collecting Virginia's motor vehicle rental tax. The unanimous passage by the House of Delegates follows approval by the House Finance Committee, which also passed the bill with no opposition.

The need to clearly define the definition of gross proceeds arose when the Virginia Department of Motor Vehicles (DMV) issued a memo that administratively expanded the scope of the motor vehicle rental tax. The memo stated that vehicle rental companies should be collecting the 10% motor vehicle rental tax based not only on the rental agreement, but also on the items listed above. The DMV considered those items to be part of the gross proceeds from the rental, even though none of them are explicitly listed as taxable in the law, whereas certain other items that are often part of rental agreements are specifically listed as taxable. Additionally, those same products or services would be specifically exempt from tax under Virginia law in any other circumstance.

TRALA members and staff, along with Dale Bennett of the Virginia Trucking Association, have argued against the over-reaching interpretation in meetings with DMV staff, but the Commonwealth maintained that they were implementing the interpretation that came from the Virginia Attorney General's office following an audit of a rental company.

It is also important to note that the Virginia Department of Taxation now handles administration of the motor vehicle rental tax, and the Department has also voiced support for the legislation. With the unanimous passage by the House, HB 1993 will now head to the Senate. Further amendments to HB 1993 are expected to be adopted in the Senate that will clarify several more items that would not be included as part of the gross proceeds subject to rental tax. (Click here to see a copy of HB 1993.) The text of those changes will be:

3. Charges for motor fuels
6. Any violations, citations or fines and related penalties and fees;
7. Delivery charges, Pickup charges, Recovery charges, Drop charges:

TRALA appreciates the leadership of Dale Bennett, President & CEO of the Virginia Trucking Association (VTA) throughout this process. For questions, please contact Joe Sculley at jsculley@trala.org or by calling (703) 299-9120.