Tax Type
Retail Sales and Use Tax
Description
Sale tax exemptions for Day Care Providers
Topic
Exemptions
Taxable Income
Date Issued
10-06-2002
October 6, 2002
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear *****:
This will reply to your letter in which you seek correction of retail sales and use tax audit assessments issued to ***** and its predecessor, (together, the "Taxpayer") for the period January 1998 through December 2000. I note that the assessments have been paid in full. I apologize for the delay in the department's response.
FACTS
The Taxpayer is a wholesale food and beverage distributor. During the audit period, the Taxpayer made sales of food and paper items to child care centers and did not charge the sales tax. The Taxpayer believed the sales to these child care centers were exempt and relied on exemption certificates supplied by these customers. The department's auditor determined that the certificates were not valid and included the sales in the audit sample. The Taxpayer contends that it accepted the exemption certificates in good faith; therefore, it should not be liable for the tax.
DETERMINATION
Title 23 of the Virginia Administrative Code (VAC) 10-210-280(A) states that:
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- All sales, leases and rentals of tangible personal property are subject to the tax until the contrary is established. The burden of proving that the tax does not apply rests with the 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 .... However, a certificate that is incomplete, invalid, infirm or inconsistent on its face is never acceptable, either before or after notice.
The Taxpayer was presented resale exemption certificates by the customers at the time of the sale. Based on a review of the certificates and the circumstances surrounding the Taxpayer's acceptance of the certificates, I agree that the good faith protection discussed in 23 VAC 10-210-280 applies in this case. Therefore, the contested sales will be removed from the assessment.
However, it is apparent that these customers cannot legitimately use the resale exemption certificate, Form ST-10. The Taxpayer is hereby notified that prospectively it should not accept a retail sales and use tax resale certificate of exemption from these customers.
The audit will be revised in accordance with the determination herein and a refund based on this revised audit report will be issued shortly. If you have any questions about this response, please contact ***** in the Office of Policy and Administration, Appeals and Rulings, at *****.
A copy of the regulation cited is included for reference purposes. This and other reference documents are also available online in the Tax Policy Library section of the Department of Taxation's web site, located at www.tax.state.va.us.
Sincerely,
Kenneth W. Thorson
Tax Commissioner
AR/35507T
Rulings of the Tax Commissioner