January 6, 2023
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This will respond to your letter submitted on behalf of ***** (the “Taxpayer”) requesting a ruling on the application of the retail sales and use tax to certified pollution control equipment and facilities. I apologize for the delay in responding to your correspondence.
FACTS
The Taxpayer, a business entity located in Virginia, contracts to construct and repair waste water and sewage treatment plants for Virginia localities. The Taxpayer obtained certifications from the Virginia Department of Environmental Quality (DEQ) that certain tangible personal property for several projects qualified as pollution control equipment. The Department issued the corresponding ST-11A exemption certificate along with a “Notice of Sales Tax Exemption” (the “Notice”), which contained several restrictions on the use of the sales tax exemption. Most notably, the Notice states that the equipment must “remain with the project” and “the exemption does not apply to: purchases or rentals… used in performance of this contract.” The Taxpayer requests a ruling on the application of the exemption to property that has been certified by DEQ but is rented or does not remain permanently with the project.
RULING
Virginia Code § 58.1-609.3 (9) provides an exemption from the retail sales and use tax for “[c]ertified pollution control equipment and facilities as defined in § 58.1-3660, except for any equipment that has not been certified to the Department of Taxation by a state certifying authority pursuant to such section.”
Title 23 of the Virginia Administrative Code 10-210-2090 addresses the sales and use tax exemption for pollution control equipment and facilities. Subsection B defines “pollution control equipment and facilities” as “any real or tangible personal property, equipment, facilities or devices used primarily for the purpose of abating or preventing air or water pollution in Virginia.” The regulation goes on to say that “[a]ny property which is certified as used for these purposes is not subject to the tax…” [Emphasis added.] Under this policy, if the property used directly to abate pollution has been certified as pollution control equipment by a state certifying agency, it is exempt from the Retail Sales and Use Tax.
In this case, DEQ is the state agency authorized to verify pollution control equipment for purposes of the exemption. As such, DEQ is the agency responsible for evaluating and issuing the appropriate certification. The Department’s position is that any property certified by the appropriate state certifying authority as pollution control equipment and facilities qualifies for exemption from the tax. Further, the limitations indicated on the Notice do not prevent the Taxpayer from engaging in tax exempt transactions for equipment or property used to abate or prevent pollution that has been certified by the appropriate agency.
However, any property that has not been certified by the appropriate state agency would not benefit from the exemption. As such, the cover letter provided with the exemption certificate is intended to provide guidance as to what types of property may not be included in a DEQ certification but is not intended to override such certification.
This response is based on the facts provided as summarized above. Any change in facts or introduction of new facts may lead to a different result.
The Code of Virginia sections and regulation cited are available online at www.tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If you have any questions regarding this ruling, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****, or via email at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/3657-C