TRALA Questions Policy Change in Virginia Vehicle Rental Tax

TRALA is questioning a notice of "policy change" from the Virginia Department of Motor Vehicles (DMV) regarding collection of tax on the rental of motor vehicles. The Virginia DMV has notified many TRALA members that they should be collecting the existing 10 percent motor vehicle rental taxes on several other items besides the revenue from the rental agreement.

In addition to certain insurance coverage that is sold to customers, the DMV states that TRALA members should collect 10 percent rental tax on items such as parking tickets, delivery charges, pickup charges, recovery charges, pass through charges, transportation charges, and third party service charges, because DMV considers these items to be part of the gross proceeds from the rental.

Virginia DMV references definitions of gross proceeds in the Virginia Motor Vehicle Sales and Use Tax Act statute and the Motor Vehicle Rental Taxes and Fees Rules and Regulations. However, aside from certain insurance charges, none of the items identified by the DMV are named in the statute or regulations referenced. The DMV says these changes will be enforced effective October 2010.

TRALA believes that these items should not be considered part of the gross proceeds from vehicle rentals and should not be subject to the 10 percent rental tax. In a letter to the Virginia DMV, TRALA states its belief that "collecting tax on these items goes far beyond the scope of the Virginia Motor Vehicle Sales and Use Tax Act as well as the Virginia Motor Vehicle Rental Taxes and Fees Rules and Regulations," and urges the DMV to rescind such assessment.

To see a copy of TRALA's letter to the Virginia DMV, please click here. A copy of the original notice from the DMV can be seen here. For more information, please contact TRALA's Joe Sculley at [email protected] or (703) 299-9120.