Tax Type
Retail Sales and Use Tax
Description
Exemption certificates; Electronic reproduction
Topic
Exemptions
Date Issued
05-19-2000
May 19, 2000
Re: Request for Ruling: Retail Sales and Use Tax
Dear ****
This is in reply to your letter in which ***** (the "Taxpayer") requests permission to electronically produce and store multipurpose exemption statements in place of Virginia sales and use tax exemption certificates. I apologize for the delay in the department's response.
FACTS
The Taxpayer, a retailer, has developed computer applications that simplify "point of sale" information storage and retrieval procedures. The Taxpayer has developed a multipurpose exemption statement for use in lieu of the purchaser providing a paper exemption certificate at the time of purchase. The Taxpayer uses certain computer screens to electronically generate a multipurpose exemption statement which is combined with the sales receipt. Purchasers use a computerized signature pad which produces a signature on the computer generated statement and receipt. The transaction is stored and may be retrieved at a later date for purposes of documenting the exempt sale.
The Taxpayer proposes to use an electronic multipurpose exemption statement in place of the prescribed exemption certificates used in Virginia.
RULING
Code of Virginia §§ 58.1-623 and 58.1-623.1 and Title 23 of the Virginia Administrative Code (VAC) 10-210-280 set forth the criteria for proper use of certificates of exemption. Code of Virginia § 58.1-623(B) provides that a certificate "shall be substantially in such form as the Tax Commissioner may prescribe." Generally, the use of a "generic" or "blanket" exemption certificate has not been allowed because specific exemption forms are available for the various exemptions provided under Virginia law.
While I appreciate your efforts to streamline the exemption process, the examples provided raise a number of concerns for the department. In considering any multipurpose exemption statement, whether in paper or electronic form, the department must ensure that the necessary information is available to verify that an exemption is properly utilized at the time of purchase. According to your discussions with a member of my Tax Policy staff, the Taxpayer's computer applications are not designed to capture the content of the information prescribed on the department's various exemption certificates. Based on our review, the Taxpayer's multipurpose exemption statement would lack vital information necessary for the proper giving and receiving of exemption certificates in accordance with Virginia's law and regulations.
For example, the department's Certificate of Exemption Form ST-12 allows federal government entities and state and local governments of Virginia to make purchases exempt of the tax. The exemption certificate may not be used by governmental entities of other states. The Taxpayer's exemption statement does not differentiate between Virginia government entities and governmental entities of other states. In addition, Virginia regulations require that a government agency provide an official purchase order to ensure that the purchase is for the use or consumption of the government, as required by the statute. The Taxpayer's procedure would not require that an official purchase order be furnished to support the exempt purchase. Therefore, the Taxpayer's proposed procedure lacks the information required for the department to determine if the government exemption is properly utilized.
Another concern is that the Taxpayer's exemption statement would allow any nonprofit organization to make tax-exempt purchases without furnishing documentation of exempt status for sales tax purposes. Virginia law does not contain a general exemption from the sales and use tax for nonprofit organizations. The only nonprofit organizations exempt from the tax are those specifically set forth in §§ 58.1-609.1 through 58.1-609.10 of the Code of Virginia. Most nonprofit organizations granted an exemption are issued a letter which must be presented to the vendor to make exempt purchases. The format of the Taxpayer's exemption statement would not allow the department to identify the organization and determine if an exemption is applicable.
The department has allowed the use of a "blanket" certificate of exemption with respect to the resale exemption and would be willing to allow the use of such a document in electronic form. In prior rulings, the department has set forth the requirements for use of a "blanket" exemption certificate in place of the department's prescribed Resale Certificate of Exemption, Form ST-10. The requirements stipulate that the information necessary for completion of Form ST-10 must be the same information necessary for completion of the "blanket" certificate of exemption form. See enclosed Public Documents 95-316 (12/15/95) and 97-95 (2/21/97).
In lieu of the paper certificate, the Taxpayer would be required to maintain the computer generated exemption statement and the sales receipt for each exempt Virginia transaction as sufficient documentation for audit purposes.
The department supports the use of electronic exemption certificates on a broader level and would be interested in pursuing the matter. It may be beneficial to establish dialogue with a retailer group and identify the issues and possible approaches. One approach that may be a possibility is to perform a pilot program using a selected number of exemption certificates in electronic form. If you are interested in further developing the use of electronic exemption certificates for Virginia, please contact ***** in the Office of Tax Policy at *****. You may also direct any additional questions about this letter to *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/16304J
Re: Request for Ruling: Retail Sales and Use Tax
Dear ****
This is in reply to your letter in which ***** (the "Taxpayer") requests permission to electronically produce and store multipurpose exemption statements in place of Virginia sales and use tax exemption certificates. I apologize for the delay in the department's response.
FACTS
The Taxpayer, a retailer, has developed computer applications that simplify "point of sale" information storage and retrieval procedures. The Taxpayer has developed a multipurpose exemption statement for use in lieu of the purchaser providing a paper exemption certificate at the time of purchase. The Taxpayer uses certain computer screens to electronically generate a multipurpose exemption statement which is combined with the sales receipt. Purchasers use a computerized signature pad which produces a signature on the computer generated statement and receipt. The transaction is stored and may be retrieved at a later date for purposes of documenting the exempt sale.
The Taxpayer proposes to use an electronic multipurpose exemption statement in place of the prescribed exemption certificates used in Virginia.
RULING
Code of Virginia §§ 58.1-623 and 58.1-623.1 and Title 23 of the Virginia Administrative Code (VAC) 10-210-280 set forth the criteria for proper use of certificates of exemption. Code of Virginia § 58.1-623(B) provides that a certificate "shall be substantially in such form as the Tax Commissioner may prescribe." Generally, the use of a "generic" or "blanket" exemption certificate has not been allowed because specific exemption forms are available for the various exemptions provided under Virginia law.
While I appreciate your efforts to streamline the exemption process, the examples provided raise a number of concerns for the department. In considering any multipurpose exemption statement, whether in paper or electronic form, the department must ensure that the necessary information is available to verify that an exemption is properly utilized at the time of purchase. According to your discussions with a member of my Tax Policy staff, the Taxpayer's computer applications are not designed to capture the content of the information prescribed on the department's various exemption certificates. Based on our review, the Taxpayer's multipurpose exemption statement would lack vital information necessary for the proper giving and receiving of exemption certificates in accordance with Virginia's law and regulations.
For example, the department's Certificate of Exemption Form ST-12 allows federal government entities and state and local governments of Virginia to make purchases exempt of the tax. The exemption certificate may not be used by governmental entities of other states. The Taxpayer's exemption statement does not differentiate between Virginia government entities and governmental entities of other states. In addition, Virginia regulations require that a government agency provide an official purchase order to ensure that the purchase is for the use or consumption of the government, as required by the statute. The Taxpayer's procedure would not require that an official purchase order be furnished to support the exempt purchase. Therefore, the Taxpayer's proposed procedure lacks the information required for the department to determine if the government exemption is properly utilized.
Another concern is that the Taxpayer's exemption statement would allow any nonprofit organization to make tax-exempt purchases without furnishing documentation of exempt status for sales tax purposes. Virginia law does not contain a general exemption from the sales and use tax for nonprofit organizations. The only nonprofit organizations exempt from the tax are those specifically set forth in §§ 58.1-609.1 through 58.1-609.10 of the Code of Virginia. Most nonprofit organizations granted an exemption are issued a letter which must be presented to the vendor to make exempt purchases. The format of the Taxpayer's exemption statement would not allow the department to identify the organization and determine if an exemption is applicable.
The department has allowed the use of a "blanket" certificate of exemption with respect to the resale exemption and would be willing to allow the use of such a document in electronic form. In prior rulings, the department has set forth the requirements for use of a "blanket" exemption certificate in place of the department's prescribed Resale Certificate of Exemption, Form ST-10. The requirements stipulate that the information necessary for completion of Form ST-10 must be the same information necessary for completion of the "blanket" certificate of exemption form. See enclosed Public Documents 95-316 (12/15/95) and 97-95 (2/21/97).
In lieu of the paper certificate, the Taxpayer would be required to maintain the computer generated exemption statement and the sales receipt for each exempt Virginia transaction as sufficient documentation for audit purposes.
The department supports the use of electronic exemption certificates on a broader level and would be interested in pursuing the matter. It may be beneficial to establish dialogue with a retailer group and identify the issues and possible approaches. One approach that may be a possibility is to perform a pilot program using a selected number of exemption certificates in electronic form. If you are interested in further developing the use of electronic exemption certificates for Virginia, please contact ***** in the Office of Tax Policy at *****. You may also direct any additional questions about this letter to *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/16304J
Rulings of the Tax Commissioner