Document Number
Tax Type
Retail Sales and Use Tax
Software Delivered Electronically: Refunds
Date Issued

January 21, 2020

Re: § 58.1-1824 Application:  Retail Sales and Use Tax

Dear *****:

This is a final determination that supplements my previous determination of April 8, 2019, which was issued to*****. (the “Taxpayer”) in response to a Virginia Code § 58.1-1821 appeal filed by you on behalf of the Taxpayer. I apologize for the delay in responding to your letter.


The Taxpayer filed refund claims for software support and maintenance charges on which consumer use taxes were reported and paid for periods from January 2011 through December 2013. The basis of the refund claims was that the software charges qualify for exemption pursuant to Virginia Code § 58.1-609.5 1. The Department’s audit staff reviewed the claims and concluded that there was insufficient information to support issuing the refunds. 

The Taxpayer filed an administrative appeal to contest the Department’s denial of the refund requests. A determination for the appeal was issued on April 8, 2019 as Public Document (P.D.) 19-24 and states that the Taxpayer did not furnish the minimum information necessary to support the refund claims for the consumer use taxes paid. However, the Taxpayer was allowed 45 days to provide the Department with additional documentation to support the refund claims. The Taxpayer has continued to report and pay to the Department consumer use taxes on the software charges for various reporting periods from January 2014 through July 2017. The Taxpayer has also filed protective claims for refunds to protect the statute of limitations for these periods. 


P.D. 05-44 (4/4/05), which is cited in the Taxpayer’s determination letter, sets out the Department’s policy with respect to the minimum documentation requirements for confirming the exemption for the electronic delivery of software products. P.D. 05-44 provides that “a sales invoice, contract or other sales agreement must expressly certify the electronic delivery of the software and that no tangible medium for that software has been or is to be furnished to the customer.”  

In P.D. 15-153 (7/16/15), the Tax Commissioner allowed the exemption for electronically delivered software in a case where the transactional evidence presented during an audit was insufficient. That taxpayer submitted additional evidence with an appeal of the audit assessment. The information included statements from the software vendor and sales invoices that confirmed electronic delivery of the software. In conjunction with the sales invoices reviewed during the audit, the information was deemed to meet the minimum documentation requirements for the exemption. 

While P.D. 15-153 allows taxpayers the opportunity to provide additional documentation to establish the exemption, the Department’s policy discussed in P.D. 05-44 continues to control whether the exemption is allowable. The information provided by the Taxpayer is not sufficient proof of electronic delivery and fails to demonstrate that there was no exchange of the software in the form of tangible personal property. As stated in the Department’s April 8, 2019 determination letter issued to the Taxpayer, the Department’s tax assessments are considered to be prima facie correct. In this case, the Taxpayer has not met its burden of proving that the payment of use taxes on the software support charges is erroneous and that the refund claims are valid.


There is no basis to issue the consumer use tax refunds for the reporting periods filed in the Taxpayer’s initial refund claim or for the subsequent reporting periods in the Taxpayer’s protective claims for refund. The Code of Virginia sections and public documents cited, along with other reference documents, are available on-line at in the Laws, Rules and Decisions section of the Department’s website. If you have any questions concerning this determination, please contact ***** at *****.



Craig M. Burns
Tax Commissioner


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Last Updated 04/03/2020 15:12