Tax Type
Retail Sales and Use Tax
Description
Sale of consumable equipment and supplies to person's with exemption certificates
Topic
Exemptions
Property Subject to Tax
Date Issued
12-04-2001
December 4, 2001
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****
This is in reply to your letter in which you seek correction of a retail sales and use tax audit assessment issued to ***** (the "Taxpayer") for the period June 1997 through February 2000. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer sells automotive equipment and supplies to a variety of customers, including motor vehicle repair shops and auto body shops. The only contested issue is the sale of tools, hand cleaners and similar consumable items that were sold exempt of the tax to customers for whom the Taxpayer had on file resale certificates of exemption. The Taxpayer maintains that it accepted valid exemption certificates, but that because of particular items sold, the exemption was denied. Accordingly, the Taxpayer contends that the responsibility to determine which items qualify for exemption should not fall to its employees. Rather, if a valid exemption certificate is on file, then the department should address the taxability of such items with the customer. Accordingly, the Taxpayer seeks a waiver of the department's assessment related to those sales where a valid exemption certificate was taken from the customer.
DETERMINATION
Title 23 of the Virginia Administrative Code (VAC) 10-210-280 indicates that the burden of proving that the tax does not apply rests with a dealer unless he takes, in good faith from the purchaser or lessee, a certificate of exemption indicating that the property is exempt under the law. This regulation also indicates that reasonable care and judgment must be used in giving or receiving certificates of exemption, and mandates that certificates of exemption "cannot be used to make a tax free purchase of any item of tangible personal property not covered by the exact wording of the certificate." In this regard, the regulation illustrates certain misuses of exemption certificates, and specifically includes:
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- Purchases under Form ST-10 (resale exemption certificate) by a registered automobile dealer, garage or service station operator, of items such as jacks or hand tools for use in the business. Such items are subject to the tax. No exemption certificate offered in making such a purchase is acceptable. (Emphasis added.)
The contested transactions in this case are sales of tools and other consumable items to auto body and auto repair shops. As set out in the regulation noted above, such sales are clearly taxable. In those instances where sales of taxable property are commingled with exempt property, the Taxpayer must use reasonable care in applying the exemption only to that property entitled to such an exemption. This policy is set out in the enclosed Public Document 86-82 (04/29/86).
Based on this determination, the assessment is correct. An updated bill, with interest accrued to date, will be sent to the Taxpayer. No additional interest will accrue provided that the updated bill is paid within 30 days from the date of this letter.
If you have any questions regarding this matter, please contact ***** of the department's Office of Policy and Administration, Appeals and Rulings, at *****@tax.state.va.us or at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
AR/30724Q
Rulings of the Tax Commissioner