LZM, Inc. v. Va. Dep't of Taxation, 269 Va. 105

Summary

The Supreme Court of Virginia held that the true object test applies to transactions involving both the lease of tangible personal property and related services. It concluded that portable-toilet pumping services were inseparable from the toilet rentals and therefore taxable, and that the maintenance contract exemption did not apply. The court affirmed summary judgment for the Virginia Department of Taxation.

Holdings

1. The true-object test applies to transactions combining a lease of tangible personal property with services because Code § 58.1-602 defines a sale to include a lease or rental.
2. The pumping services were inseparable from the portable-toilet rentals and were taxable as part of the transaction's true object.
3. The maintenance-contract exemption did not apply to LZM's portable-toilet pumping services.
4. The trial court's factual misstatements did not require reversal because they did not affect the protested amount or the court's true-object analysis.

Questions Presented

1. Whether Virginia's true-object test applies to a transaction involving both the lease of tangible personal property and related services.
2. Whether the pumping services were separate and distinct from the portable-toilet leases or instead formed part of the taxable true object of the transaction.
3. Whether the statutory maintenance-contract exemption applied to the portable-toilet pumping services.
4. Whether alleged factual misstatements by the trial court required reversal.

Disposition

affirmed