September 27, 2019
Re: § 58.1-1821 Refund Application: Retail Sales and Use Tax
Dear *****:
This is in response to your letter submitted on behalf of ***** (the “Taxpayer”), in which you seek a refund of retail sales and use tax remitted to the Department for the period July 2013 through September 2013. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer is a total site development company engaged in all aspects of site development and road construction. Pursuant to Virginia Code § 58.1-639 and Public Document (P.D.) 13-103 (6/1/13), Guidelines for the Retail Sales and Use Tax Changes Enacted in the 2013 General Assembly Session, the Taxpayer requested a refund of sales tax remitted to the Department for purchases made with respect to real estate construction contracts. The refund request totaled *****.
Based upon the refund verification conducted by the Department’s auditor, it was determined that certain contracts included in the refund request were not eligible for the refund. The auditor determined that those contracts were not bona fide contracts as considered in the aforementioned authorities because the contracts were not dated and did not contain signatures of all of the parties to the contract. Accordingly, the Taxpayer was granted a refund for *****. The Taxpayer contends that the denied contracts are bona fide contracts and requests that it be granted a refund for the remaining amount, *****. The Taxpayer has provided with its appeal the contracts for which the refund was denied.
DETERMINATION
Bona Fide Contracts
Virginia Code § 58.1-639 A provides the following:
To the extent of the 0.3 percent increase in the state sales and use tax rate effective July 1, 2013, enacted by the 2013 Session of the Virginia General Assembly, the Tax Commissioner, upon application of the purchaser in accordance with regulations promulgated by the Commissioner, shall have the authority to refund state sales or use taxes paid on purchases of tangible personal property made pursuant to bona fide real estate construction contracts, contracts for the sale of tangible personal property, and leases, provided that the real estate construction contract, contract for the sale of tangible personal property or lease is entered into prior to the date of enactment of such increase in the state sales and use tax rate; and further provided that the date of delivery of the tangible personal property is on or before September 30, 2013. The term "bona fide contract," when used in this section in relation to real estate construction contracts, shall include but not be limited to those contracts which are entered into prior to the enactment of such increase in the state sales and use tax rate, provided that such contracts include plans and specifications. [Emphasis added].
Virginia Code § 58.1-639 B further states:
Notwithstanding the foregoing September 30, 2013, delivery date requirement, with respect to bona fide real estate construction contracts which contain a specific and stated date of completion, the date of delivery of such tangible personal property shall be on or before the completion date of the applicable project.
The Guidelines provide guidance to Retail Sales and Use Tax dealers regarding the refund request at issue. House Bill 2313 increased the rate of the statewide Retail Sales and Use Tax and imposed an additional state Retail Sales and Use Tax in the Northern Virginia and Hampton Road regions. The increases applied to sales that occurred on and after July 1, 2013. The new law included transitional provisions for persons who, prior to April 3, 2013 (the date the legislation was signed by the Governor), entered into bona fide real estate construction contracts, contracts for the sale of tangible personal property, or leases of tangible personal property. Under the transitional provisions, the purchaser or lessee of the property will be entitled to request a refund from the Department of the additional tax paid as a result of the rate increase if the date of delivery of the tangible personal property is on or before September 30, 2013.
With respect to real estate construction contracts, the Guidelines state:
Refunds of the tax paid on and after July 1, 2013 are available when tangible personal property is purchased or leased under a bona fide real estate contract or a bona fide highway construction contracted entered into before April 3, 2013. A bona fide contract is one that included finished plans and specifications before April 3, 2013. Refunds will not be available, however, in the event the bona fide contract is renegotiated or to the extent that a contract is expanded to include additional work or the furnishing of additional materials.
The Guidelines further provide that the rules for obtaining refunds of the tax on purchases or leases under bona fide real estate construction contracts vary depending on whether or not the contract contains a specific and stated date of completion. In the case of bona fide real estate construction contracts that do not contain a specific and stated date of completion, refunds of the additional tax may be claimed only with respect to purchased or leased tangible personal property that is delivered to the contractor on or before September 30, 2013. In the case of a bona fide real estate construction contracts that contain a specific and stated date of completion, refunds of the additional tax paid on and after July 1, 2013, will be available for all property delivered on or before the completion date specified in the contract. [Emphasis added.]
Based upon a review of the contracts provided by the Taxpayer with its appeal, the contracts at issue all appear to be dated before April 3, 2013, and are bona fide in accordance with the aforementioned authorities. The contracts and supporting invoices will be reviewed by the audit staff to determine whether the Taxpayer is eligible for refunds for the sales tax paid on purchases made pursuant to these contracts. If the contracts do not contain a specific and stated date of completion, refunds will only be allowed for purchases that were delivered to the contractor on or before September 30, 2013. With respect to the contracts that do contain a specific and stated date of completion, refunds will be allowed for property delivered on or before the completion date specified in contracts.
CONCLUSION
The contracts provided with the appeal will be forwarded to the auditor to complete the review and verification required by this determination. The auditor will contact the Taxpayer to provide a timeframe for when the additional documentation addressed herein must be provided. Once the review and verification are complete, the refund, plus refund interest will be issued to the Taxpayer as warranted.
The Code of Virginia section and public document cited 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
1. The statute was enacted through House Bill 2313 (Acts of Assembly 2013, Chapter 766) during the 2013 General Assembly.
AR/1315P