January 6, 2023
Re: § 58.1-1821 Appeal: Retail Sales and Use Tax
Dear *****:
This will respond to your letter submitted on behalf of ***** (the “Taxpayer”) in which you request a refund of the retail sales and use tax paid on certified pollution control equipment and facilities. I apologize for the delay in responding to your request.
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 pursuant to Virginia Code § 58.1-3660.
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. 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 requested a refund of sales and use tax paid on transactions for property certified by DEQ, but TAX denied the requested refund citing the restrictive language in the Notice. The Taxpayer appealed, requesting that the refund be allowed.
DETERMINATION
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 case will be returned to the appropriate audit staff to reconsider the Taxpayer’s request for refund consistent with this determination, and to consider any additional information that has been provided by the Taxpayer. After review, the auditor will issue a refund of any tax paid on exempt purchases or rentals of certified property and will provide an updated written explanation of any part of the Taxpayer’s request for refund that remains ineligible for refund. If the Taxpayer continues to disagree with any part of the auditor’s determination, it may appeal within 90 days of such determination pursuant to Virginia Code § 58.1-1821.
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/4024-C