Tax Type
Retail Sales and Use Tax
Description
Public utility; Certificate of convenience effective date
Topic
Accounting Periods and Methods
Collection of Delinquent Tax
Date Issued
06-23-2000
June 23, 2000
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This will reply to your letter of April 7, 2000, in which you seek correction of the retail sales and use tax audit assessment issued to your client, ***** (the "Taxpayer"), for the period of August 1995 through December 1998.
FACTS
The Taxpayer is in the business of mining and storing natural gas. The Taxpayer applied to the Virginia State Corporation Commission (the "SCC") for a certificate of convenience and necessity on June 10, 1996. The SCC issued to the Taxpayer a certificate of convenience and necessity in November 1996. The Taxpayer amended its charter on December 16, 1996, to reflect its classification as a public service corporation. The Taxpayer filed its first franchise and license tax on gross receipts for the period of January 1997.
Upon audit, the auditor determined that, effective November 1996, the Taxpayer could make tax-exempt purchases in accordance with the statutory exemption extended to public service corporations under Code of Virginia § 58.1-609.3(3). At issue in this case are purchases made by the Taxpayer prior to November 1996, in anticipation of receiving its certificate of convenience and necessity. The Taxpayer contends the audit assessment is erroneous and should be abated.
DETERMINATION
In pertinent part, Code of Virginia § 58.1-609.3(3) provides an exemption from the retail sales and use tax for:
Tangible personal property sold or leased to... a public service corporation subject to a state franchise or license tax upon gross receipts ....
Title 23 of the Virginia Administrative Code (VAC) 10-210-3020, copy enclosed, addresses public utilities and subsection B of this regulation defines public utility as follows:
The term "public utility" as used herein is synonymous with "public service company" or "public service corporation" and means all business entities deemed to be public utilities with in the definitions set forth under §§ 56-232 and 56-265.1 of the Code of Virginia. Such entities have been issued certificates of convenience and necessity by the State Corporation Commission and include those engaged in the generation, transmission or distribution of electricity, natural or manufactured gas ....
The Taxpayer contends that even though it had not received a certificate of convenience and necessity from the SCC prior to November 1996, it was in fact a public service corporation in accordance with the definitions set forth in Code of Virginia §§ 56-232 and 56-265.1.
The department is bound by Code of Virginia Title 58.1, Taxation, and its interpretation of this statute under Title 23 of the Virginia Administrative Code (VAC). As noted above, Code of Virginia § 58.1-609.3(3) provides a sales and use tax exemption for a public service corporation which is subject to the state franchise or license tax on gross receipts. In interpreting this exemption statute, VAC 10-210-3020.B provides that, in addition to being subject to state franchise and license tax on gross receipts, to qualify for the public service corporation exemption the corporation must hold a certificate of convenience and necessity issued by the SCC.
Based on the filing information furnished to the department by the SCC, the Taxpayer was subject to the state franchise and license tax beginning January 1997. In addition, the Taxpayer was not eligible for the sales and use tax exemption until it obtained a certificate of convenience and necessity in November 1996. This has been the longstanding policy of the department as exhibited in Public Documents (P.D.) 86-226 (11/3/86) and P.D. 00-51 (4/14/00), copies enclosed.
However, as provided in your letter, on July 10, 1996 the SCC docketed the Taxpayer's application for certification and placed in effect interim rate schedules for the Taxpayer as filed. This being the case, the exemption for the Taxpayer will be effective July 10, 1996, as opposed to November 1996, the date the actual certificate was issued. The audit will be revised to reflect this change. Once the audit has been revised, a revised assessment will be issued to the Taxpayer.
If you should have any questions concerning this determination, please contact *****, Office of Tax Policy, at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/28245K
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear ****
This will reply to your letter of April 7, 2000, in which you seek correction of the retail sales and use tax audit assessment issued to your client, ***** (the "Taxpayer"), for the period of August 1995 through December 1998.
FACTS
The Taxpayer is in the business of mining and storing natural gas. The Taxpayer applied to the Virginia State Corporation Commission (the "SCC") for a certificate of convenience and necessity on June 10, 1996. The SCC issued to the Taxpayer a certificate of convenience and necessity in November 1996. The Taxpayer amended its charter on December 16, 1996, to reflect its classification as a public service corporation. The Taxpayer filed its first franchise and license tax on gross receipts for the period of January 1997.
Upon audit, the auditor determined that, effective November 1996, the Taxpayer could make tax-exempt purchases in accordance with the statutory exemption extended to public service corporations under Code of Virginia § 58.1-609.3(3). At issue in this case are purchases made by the Taxpayer prior to November 1996, in anticipation of receiving its certificate of convenience and necessity. The Taxpayer contends the audit assessment is erroneous and should be abated.
DETERMINATION
In pertinent part, Code of Virginia § 58.1-609.3(3) provides an exemption from the retail sales and use tax for:
Tangible personal property sold or leased to... a public service corporation subject to a state franchise or license tax upon gross receipts ....
Title 23 of the Virginia Administrative Code (VAC) 10-210-3020, copy enclosed, addresses public utilities and subsection B of this regulation defines public utility as follows:
The term "public utility" as used herein is synonymous with "public service company" or "public service corporation" and means all business entities deemed to be public utilities with in the definitions set forth under §§ 56-232 and 56-265.1 of the Code of Virginia. Such entities have been issued certificates of convenience and necessity by the State Corporation Commission and include those engaged in the generation, transmission or distribution of electricity, natural or manufactured gas ....
The Taxpayer contends that even though it had not received a certificate of convenience and necessity from the SCC prior to November 1996, it was in fact a public service corporation in accordance with the definitions set forth in Code of Virginia §§ 56-232 and 56-265.1.
The department is bound by Code of Virginia Title 58.1, Taxation, and its interpretation of this statute under Title 23 of the Virginia Administrative Code (VAC). As noted above, Code of Virginia § 58.1-609.3(3) provides a sales and use tax exemption for a public service corporation which is subject to the state franchise or license tax on gross receipts. In interpreting this exemption statute, VAC 10-210-3020.B provides that, in addition to being subject to state franchise and license tax on gross receipts, to qualify for the public service corporation exemption the corporation must hold a certificate of convenience and necessity issued by the SCC.
Based on the filing information furnished to the department by the SCC, the Taxpayer was subject to the state franchise and license tax beginning January 1997. In addition, the Taxpayer was not eligible for the sales and use tax exemption until it obtained a certificate of convenience and necessity in November 1996. This has been the longstanding policy of the department as exhibited in Public Documents (P.D.) 86-226 (11/3/86) and P.D. 00-51 (4/14/00), copies enclosed.
However, as provided in your letter, on July 10, 1996 the SCC docketed the Taxpayer's application for certification and placed in effect interim rate schedules for the Taxpayer as filed. This being the case, the exemption for the Taxpayer will be effective July 10, 1996, as opposed to November 1996, the date the actual certificate was issued. The audit will be revised to reflect this change. Once the audit has been revised, a revised assessment will be issued to the Taxpayer.
If you should have any questions concerning this determination, please contact *****, Office of Tax Policy, at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/28245K
Rulings of the Tax Commissioner