January 11, 2023
Re: Request for Ruling: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the “Taxpayer”) requesting a ruling on the application of the retail sales and use tax exemption provided by Virginia Code § 58.1-609.3 (9).
FACTS
The Taxpayer has been awarded a contract for the design and construction of a new bridge and tunnel system in Virginia. The Taxpayer states that it has received certification from the Virginia Department of Environmental Quality (DEQ) for certain equipment or components to be used for pollution control. The Taxpayer asks the following questions:
1. Once the appropriate state agency certifies that specific items of tangible personal property are pollution control equipment, can the Department refuse to apply the exemption to that property?
2. Once items are certified by the appropriate state agency as pollution control equipment, does the duration that the items are used affect whether the exemption applies?
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 qualify for exemption from the tax. Further, the limitations indicated on the cover letter of the exemption certificate provided by the Department do not prevent the Taxpayer from enjoying the exemption 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 section and regulation cited, along with other reference documents, are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department’s web site. If you have any questions about this response, you may contact ***** in the Department’s Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/3993.G